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The biopharmaceutical anomaly

Investment and funding has continued to flow into biotech, unlike most business sectors. But with healthcare and hospital budgets increasingly under pressure, do belt-tightening and consolidation lie ahead? Melanie Senior investigates, with additional reporting by Riku Lähteenmäki.

The biopharmaceutical industry largely has been spared from the public market rout that has gutted most economic sectors since COVID-19 hit. After an initial, indiscriminate shock to stock prices in March 2020, investment in biotech companies listed on the stock exchanges has actually increased. The Nasdaq Biotechnology Index emerged from the slump to reach a five-year high — up 11% since the start of the year, following a 20% rise in 2019. Biotech initial public offering (IPOs) have also picked up; in June, the over two dozen 2020 listings had together raised nearly $8 billion — more than over the same period in 2019. In early June, CAR-T cell therapy maker Legend Biotech raised $424 million in the largest ever Nasdaq listing by a Chinese biotech.

“The capital markets remain open and active,” to the surprise of many, says Geoffrey Porges, senior biopharmaceuticals analyst at SVB Leerink. The non-discretionary nature of healthcare — and the sector’s key role in finding solutions to the pandemic — have also attracted a flood of generalist and retail investors as they flee struggling sectors like retail, restaurants and airlines. Private biotech financing also had a record first quarter. The pandemic, which has been poison to most sectors of industry, has brought funds to biopharmaceutical enterprises from an even wider spread of investors than normal.

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