25 Years of Cycles: Similarities and Differences, Company and Fund Performances, and the Attempt of an Outlook

By Dylan Kissane

The more things change, the more they stay the same. But will it continue to hold when it comes to biopharma and the life sciences?

A panel session sought to present an overview of the last quarter-century of change in the biopharma world. Five industry experts compared the ups and downs of the industry to the current downward trend in valuations and investment. They asked themselves: Is everything old new again, or is it different this time around?

Moderator Olivier Litzka of Andera Partners set the stage by offering a quick review of the last 25 years of biopharma dealmaking and market performance. While he reminded the audience of industry downturns in 2000-02, 2008-10, 2015-16, and now again in 2022, he explained that biotechnology outperformed the NASDAQ and the NYSE overall. Venture financing in the sector has remained consistently strong and grown substantially in the last ten years, in contrast to the number of IPOs dropping dramatically over the previous 12 months. With these facts as background, he asked the panelists to share their thoughts on the sector’s future and whether this current dip is another cyclical correction the industry has grown used to weathering in the new millennium.

For Ulrica Slane Bjerke, Founder and CIO at Arctic Aurora Life Science, this time is different because the downturn is entirely driven by macroeconomic factors outside the industry's control. For her, the overarching factor driving the slowdown is higher interest rates. When interest rates are low, IPOs explode, but public capital markets dry up when they are high.

John Haurum, Chairman of JSH Biotech, largely agreed. He explained that there is a global component to the downturn owing to the COVID-19 pandemic, the conflict in Ukraine, and the rise in interest rates. He believes the current downturn mirrored the one of 2001-02 when the 9/11 attacks and the following events led to a market contraction.

Holger Reithinger, a Partner at Forbion, was not worried. “The majority of our partners have experienced these sorts of cycles in the past,” he said, so even if a downturn cannot be precisely predicted, it can be managed. By its nature, he reminded the audience that biotechnology is a long-term bet for investors. So stable, diverse, and highly skilled teams should not fear the effects of short-term setbacks.

Matthias Kromayer, Managing Partner at MIG Capital, mostly concurred. Even before the pandemic, his biotech investments had generated unrealized returns of 30x, which increased to 75x in the wake of the pandemic. “You don’t need luck to win in biotech,” he said, and even if biotech founders make big promises, they can deliver on those promises, as the pandemic proved. Furthermore, while he acknowledges the difficulty in selling a biotech company right now, he believes it is perhaps the best time to start a biotech. He thinks history backs him on this point, as many of the world’s most well-known companies were born during tough times.

Uli Grabenwaeter, Deputy Director at EIF, is equally bullish on biotechs. His fund invests €3 billion annually across various industries, and life science bets have paid off in ways other sectors have not. “25 years ago, things were different,” he said, and investing in biotech was closer to philanthropy than a genuine effort to generate profits. Today, though, his firm’s investments in biopharma outperform even the high returns of the Information and Communications Technology sector. Like the rest of the panel, Grabenwaeter sees plenty to like about the life sciences right now, even if the market conditions might suggest otherwise.