Will life sciences funding slow as recession bites?

Last year Oxford University spinout Mirobio was acquired by USA pharmaceutical giant Gilead for $405 million. The investment landscape has changed since then, so will future life sciences funding be less successful?

Simon Jones at SpyBiotech said: “A problem for unlisted companies is the relationship between them and the public markets. As we meet together in late 2022, the NASDAQ Index is down, so investing in listed companies potentially starts to look cheaper. I have seen that flip flop before in my career. Why invest in an unlisted, unproven company when I can invest in a company which has a similar valuation but more profile? There is invariably money for good companies, but it can impact on smaller companies’ valuations.”

Interest rates are also a factor, according to Adam Stoten. “Low interest rates tend to drive investors towards venture capital because returns are comparatively attractive. With high interest rates there could be less money for venture capital. We are listed on NASDAQ and Frankfurt Stock Exchange so we don’t have to go out to venture capital for funding, but many companies are reliant on them for funding and that has to be a concern.”

Michalis Papadakis at Brainomix, added: “We closed our Series B round last December and have since seen a complete change in the market with investors being more conservative.”

But Adam added that many venture capital companies still have money yet to be invested. “They are committed to deploy funds to get returns within a defined period. They can invest in their existing portfolio for so long, but eventually they must start putting it into new investments.”

Claus Andersen pointed out that the sector is entering a period where investors are being more cautious. “But there is still demand, and they are now looking beyond London, thanks to the success of the Oxford AstraZeneca vaccine and other science innovations. Investors recognise the effectiveness of eco-systems in many parts of the UK, particularly in Oxford, Cambridge, Bristol and other places.”

There has recently been a trend of companies with very early-stage technologies spinning out and even going for public listing much earlier than they would traditionally have done so.

“Some of those companies are going to find the current environment more challenging, but there’s a lot of highquality R&D under way in the UK life sciences sector” said Graham Gri ths.

Pre-Covid, vaccine development was often underpinned by grant-funding. Deborah Spencer wondered whether it would be easier to secure external funding for this sector post-pandemic.

Graham felt that Covid has demonstrated once again that smaller companies are capable of discovering and developing valuable and impactful products.

Miguel Silva at OMass Therapeutics, added: “We saw this with monkeypox recently where companies working on a monkeypox vaccine did very well as governments started to stockpile very early. The whole area of pandemic preparedness is likely to continue to grow.”

OMass raised $100 million last year, but the company is not complacent. Miguel added: “We continue to think ahead. We don’t know what the markets are going to look like when we need to raise money next, so one of the exercises we are currently going through is trying to understand how the current macro climate impacts our cash runaway, what our key value inflection points are, and what we need to do to get there.”