Biotech Sector Activity May Be Poised to Pick Up in 2024: Armistice Capital, Invenomic Capital Management and Boothbay Fund Management
By Space Coast Daily // July 24, 2024
The COVID-19 pandemic — and the associated healthcare needs it presented — ushered in a new era of biotech investment.
Research in the sector, which involves using biological processes and living organisms at a molecular level to create medical solutions, has numerous applications. In recent years, it has produced innovative new drugs and therapies — including the vaccines introduced in 2021 [EB1] which, using laboratory-created mRNA, help prepare cells within the body to trigger an immune response that can help fight off future COVID-19 infections, according to the CDC.
In 2020, the initial year of the pandemic, biotech-related venture financing reached a new high of $23 billion, according to the Nature Biotechnology journal — a 60% increase from the year before.
Biotech stocks rose 20% that year from 2019, and the number of biotech company initial public offerings increased by more than 39[EB2] %; more than half, the scientific journal says, were preclinical or phase 1 companies.
Investment in the industry didn’t remain quite as robust, however.
A pandemic-era surge in venture financing — which included an 104% increase in funding for U.S.-based companies that were working to produce innovative drugs in 2021 — resulted in a number of early-stage biotech companies going public with a high valuation. When some failed to deliver landmark outcomes, investor confidence and interest in the sector declined, according to analytics provider GlobalData.
Forty-one biotech companies went bankrupt in 2023, which BioSpace said was a new record for the industry.
Although the biotech industry had generally relied more on equity financing than debt in the past, a shift to greater debt-related financing during the COVID-19 pandemic later presented liquidity difficulties for some companies and made obtaining capital more challenging, according to the BioSpace platform, as interest rates rose.
Between March 2022 and mid-2023, to reduce inflation, the Federal Reserve made 11 increases to the target range for the federal funds rate — the interest rate banks use to lend each other money, which influences consumer and business borrowing costs.
The federal funds rate’s target range rose to what Bankrate estimates was its highest point in 23 years, 5.25% to 5.5% — which the Fed has held it at since July 2023.
Recently, though, the investment outlook for the industry has seemed a bit more uplifting. A total of 12 biopharma IPOs, totaling $2.5 billion, were offered last year, according to a report published in March by global law firm Ropes & Gray; as of February 19, seven companies had already gone public in 2024.
Biotech and pharmaceutical entities raised $5.9 billion in 209 rounds of financing in the first quarter of this year, according to a report from capital market research provider Pitchbook and the National Venture Capital Association. Despite fewer deals having taken place, the first quarter total is higher than 2023’s quarterly average.
In addition, a recent survey [EB3] GlobalData conducted found more than 44% of healthcare industry professionals feel either optimistic or very optimistic about biotech funding recovering this year.
[SUBHED] Investors Have Shown Enthusiasm for Biotech
With the global biotechnology market projected to grow at a compound annual growth rate of 11.8% to reach a market size of $4.25 trillion by 2033, according to Precedence Research, a number of hedge funds have invested in the sector in 2023 and 2024 — particularly funds that feature a focus on healthcare, such as Armistice Capital, and venture capital firm venBio’s venBio Fund IV, which invests in therapeutics companies that are developing biopharmaceuticals for unmet medical needs.
Glucagon-like peptide-1, or GLP-1 medications have drawn significant interest in the past year; they helped push the weight loss market’s value to an all-time-high of $90 billion in 2023 — and their popularity also caused revenue reductions in non-medical segments of the industry, such as weight loss coaching, according to Marketdata LLC research.
In addition to Novo Nordisk, which manufacturers the semaglutide Type 2 diabetes drug Ozempic and Wegovy, prescribed for weight loss, a number of other companies are conducting research and expanding into the area.
Human pilot study results released earlier this year indicated a formulation the company prepared using crushed Rybelsus semaglutide tablets, made by Novo Nordisk, helped deliver a higher proportion of the drug more quickly; reduced the quantity and severity of unwanted side effects — and had a significant impact on blood sugar after eating a meal.
Armistice Capital also, according to Nasdaq, has invested in Cytokinetics Incorporated, whose research focuses on modulating proteins in the sarcomere — the fundamental unit of muscle contraction within muscle cells, which, according to the company, “are the keys to unlock the potential treatment of diseases that are caused by impaired muscle function” — to help improve the lives of people living with cardiovascular and neuromuscular conditions.
Several other funds, according to Yahoo Finance, including British hedge fund Marshall Wace LLP and Boxer Capital, a private biotechnology investment fund, also hold shares of the company — which recently announced it has entered into a strategic funding collaboration that will provide capital to support the commercialization of aficamten, a cardiac myosin inhibitor designed to suppress the myocardial hypercontractility that’s associated with hypertrophic cardiomyopath, and advance its c.
