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Yahoo
8 hours ago
- Business
- Yahoo
A longer ‘winter': Public funding slowdown heightens pressure on biotech startups
This story was originally published on BioPharma Dive. To receive daily news and insights, subscribe to our free daily BioPharma Dive newsletter. Biotechnology industry watchers were hopeful at the start of 2025. Venture funding appeared to be rebounding after a lengthy slump, and a smattering of new stock offerings and company acquisitions brewed optimism that the public markets might be similarly warming up to young drugmakers. But the positivity quickly dissipated. Trump administration policies gutted scientific research funding and raised questions about U.S. drug prices. Large layoffs and upheaval at public health agencies created regulatory turmoil that added risk to what's already, by its nature, a risky sector to invest in. The results were laid out in a June report from David Windley and Tucker Remmers, two analysts at the investment bank Jefferies. According to that report, funding in public biotech companies — be it from initial public offerings, follow-on stock offerings, or 'PIPE' deals — plummeted in May. The 'political and economic uncertainties' have "cast a cloud over biotech investment,' they wrote. 'Since product development cycles can range 12-15 years in this industry, biotechs (and their boards and investors) want clarity on FDA regulation, drug pricing, and funding before committing to large, [long-term] investments,' Windley and Remmers wrote. Investors and industry insiders interviewed by BioPharma Dive say that the public slowdown is trickling down to startups that have already been under intense pressure during a prolonged pullback. Companies and investors are struggling to align on valuations, making funding rounds more difficult to close than in prior years. The uphill battle in the public markets is further delaying IPO plans, too. "People are waiting to see what happens, and it's extended that winter," said Tim Scott, the president of Biocom California, an industry trade group. To date, only seven biotech companies have priced IPOs in 2025, and no large offerings have occurred since mid-February. No biotechs have publicly disclosed IPO ambitions in several months either, and one of the last to do so, Odyssey Therapeutics, pulled its offering in May. In a letter to the Securities and Exchange Commission, CEO Gary Glick wrote that it was 'not in the best interests of the company' to go public at that time. One reason IPOs have ground to a halt, experts say, is that the public markets aren't rewarding drug startups as predictably as they once were. Typically, drug companies can expect their value to climb after delivering positive clinical results. But 'even companies with good data aren't seeing a lot of movement in the public markets,' said Jonathan Norris, a managing director at HSBC Innovation Banking. As a result, Norris said, companies are looking at the time and expense it takes in the monthslong process to go public and wondering: 'What's the benefit?' 'If you have any readouts that are even eye squinting, you're going to get crushed,' he said. 'It's a tough, tough endeavor.' The shuttered IPO window is exacerbating problems for young biotechs. "If you don't have a public market opportunity, then the companies that are private have to think about ways to raise capital and stay private for longer," said Maina Bhaman, a partner at Sofinnova Partners. Feeling that burden, venture investors are becoming more conservative. While private funding hasn't plummeted as much as its public counterpart, investors are more selective and slower-moving. Funding has become increasingly consolidated into fewer and larger 'megarounds,' to the extent that more firms are compiling similar portfolios. And they're hard to finalize, even when most of a funding syndicate is already onboard, according to Norris. "People are struggling to figure out where the bottom of the market is and what's the appropriate valuation and expectation for that investment,' he said. "A lot of VCs are pencils down right now on deals they would otherwise be moving forward on,' Scott added. Pullbacks are nothing new in biotech. But what has been unusual, some say, is how long the sector has spent in the doldrums after peaking in early 2021. One reason is the most recent boom flooded the market with more companies than it could support. But another is that the ensuing correction has intensified amid regulatory and political upheaval. A report last week from Roel van den Akker, PwC's U.S. pharma and life science deals leader, predicted that companies will be 'preparing contingency plans' to account for delays in 'trial oversight' and drug applications. Drug companies are used to dealing with a high level of risk, as most experimental medicines never make it to market. But 'now you've got a lot more macro uncertainty that is being layered on top," Bhaman said. On the public side, that uncertainty has resulted in less patient investors, some of whom are pressing company boards to shut down after setbacks rather than change course. But some startups are taking drastic steps, too, such as cutting programs and staff to, some experts believe, depress their value so they can still attract investment. The "lack of surety" is pressuring biotechs to be as efficient as possible with their cash, Scott said, perhaps working on one program instead of a few. There have been multiple high-profile examples of late. Eikon Therapeutics and Insitro, two well-funded startups, both cited a need for 'prudence' in laying off staff. Norris expects more companies to proactively cut staff, or even close, as the longer-than-expected winter drags on. 'Most of those companies are not going to find the investors that they're hoping for,' he said. 'And I think that's just the unfortunate truth.' Recommended Reading Radiopharmaceutical drugmaker RayzeBio signals plans to go public
Yahoo
05-06-2025
- Business
- Yahoo
Biotech funding plummets as Trump policies unnerve investors: Jefferies
This story was originally published on BioPharma Dive. To receive daily news and insights, subscribe to our free daily BioPharma Dive newsletter. The amount of funding going into biotechnology companies has fallen off over the last couple months, a trend the investment bank Jefferies pins on Trump administration policies aimed at gutting the agencies responsible for conducting and regulating drug research. Looking at financial data from FactSet, Jefferies analysts found biotech funding in May was down 57%, to just over $2.7 billion, compared to the same time last year. That sum was only slightly better than the nearly $2.6 billion raised in April — the worst haul in three years — and was also 44% lower than the average seen across the past 12 months. The analysts, David Windley and Tucker Remmers, argue that these declines have been exacerbated by Trump's White House. They believe unclear plans to lower U.S. drug prices, coupled with mass layoffs at the Food and Drug Administration and colossal budget cuts proposed for the National Institutes of Health, have diminished investor confidence in biotech. 'Current policy proposals and agency staffing cuts have cast a cloud over biotech investment,' Windley and Remmers wrote in a note to clients Tuesday. 'Since product development cycles can range 12-15 years in this industry, biotechs (and their boards and investors) want clarity on FDA regulation, drug pricing, and funding before committing to large, [long-term] investments.' As such, the 'current environment is not conducive to biotech investment right now, contributing to the soft funding,' they added. Significant dips in funding can hurt any industry. But they're especially dangerous for biotech, where the expensive process of discovering and testing new medicines requires companies to raise cash on a near-constant basis. Most drug startups never become profitable. The recent pullback, then, means it's likely some companies are operating even further in the red. Jefferies' analysis found funding for public biotechs — whether from an initial public offering, a follow-on stock offering or a so-called PIPE deal — totaled $1.1 billion in May, 'far below' the roughly $4.5 billion of cash those companies burn through each month on average. Investors have also increasingly been pressuring the boards of struggling biotech companies to liquidate and return capital to shareholders rather than continue on in a difficult climate. In the past couple of months alone, cancer drugmaker iTeos and immune system specialist Third Harmonic Bio each announced plans to sell their assets and shut down. Many others are evaluating options. California-based Tempest Therapeutics, for example, is exploring strategic transactions because it doesn't have enough money to complete studies of its main drug. Tempest CEO Stephen Brady said capital markets 'have been unavailable to support the next stage of advancement.' According to the Jefferies analysts, venture capital contributions have 'held up better' than the public markets' so far this year, with the former down 12% compared to 2024 and the latter down 62%. Monthly venture capital funding has averaged about $1.9 billion in 2025, they wrote. The analysts also noted how, last year, the first quarter had the highest levels of biotech funding. The comparative declines should therefore begin to ease in the back half of this year. What may not ease is the 'uncertainty on steroids' that biotech investors and dealmakers say they've been contending with for the last six months. Some investment firms claim they've already seen changes in their day to day. At Lux Capital, principal David Yang previously told BioPharma Dive that some academic institutions were asking for money to cover overhead costs shortly after hearing news of the proposed NIH cuts. And at the Chicago Biomedical Consortium, Executive Director Michelle Hoffmann said her team is 'incredibly worried' they won't 'get enough projects through our process to be building new, small companies.' There is 'a lot of fear and uncertainty' and 'tightening belts,' she said. Recommended Reading Biotech 'megarounds' hold steady as startups, VCs wait on IPOs Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Time of India
01-05-2025
- Business
- Time of India
Humana's lower medical costs ease investor fears after UnitedHealth results
Bengaluru: Health insurer Humana on Wednesday reported lower-than expected medical costs in the first quarter, allaying investor concerns about the sector after bellwether UnitedHealth's disappointing financial results earlier this month. Humana also beat quarterly profit estimates by a large margin, lifting shares of most other insurers, while broader markets were down. Shares of UnitedHealth were down 1.5 per cent. Shares in the health insurance sector have been volatile since UnitedHealth on April 17 missed quarterly estimates for the first time since 2008, and lowered its outlook for the full year, as high healthcare demand among older adults drove up costs in its Medicare Advantage (MA) plans. UnitedHealth said earlier this month its MA plans, which serve adults aged 65 and above and those with disabilities, saw increased use of medical services, driving its costs above expectations. Investors were afraid that UnitedHealth's warning would echo in the results of other insurers too. But "Humana's results should be a calming influence," said Jefferies analyst David Windley. Humana, which is a top provider of U.S. government's MA plans, said it captured members from competitor insurers, just as UnitedHealth did. But its medical costs remained in line with the company's expectations, said Humana CEO James Rechtin . Humana, like Elevance, has said it is not seeing anything unusual around medical use in both its insurance and caregiving operations, said Julie Utterback, an analyst at Morningstar. "So perhaps there is a UnitedHealth-specific issue going on." Humana said its MA plans are performing as anticipated to date, and it is progressing on its decision to exit certain unprofitable counties. The company even expects to reach a Medicare Advantage margin of 3 per cent by 2027, but that goal is dependent on the company's Stars performance rating , said Humana chief financial officer Celeste Mellet. In 2024, Humana sued the Department of Health and Human Services on its less favorable performance rating. "I think the best way to describe where we are at this moment is that while there are still challenges to navigate, there are no surprises," said CEO Rechtin. "The external environment is evolving as we expected, and we are executing on the things we control." The company's first-quarter medical cost ratio in its insurance segment - the percentage of premiums spent on medical care - came in at 87.4 per cent, compared with analysts' estimates of 87.5 per cent, according to data compiled by LSEG. On an adjusted basis, Humana earned a profit of $11.58 per share in the first quarter, above analysts' average estimate of $10.07. It also reaffirmed its 2025 adjusted profit forecast of about $16.25 per share.
