2018 is off to an explosive start for biotech merger and acquisition (M&A) activity. Companies have signed deals worth $25 billion with only a few months into 2018. Analysts expect a wave of acquisition deals to follow.
To put things into perspective, the total amount spent on biotech M&A deals was $50 billion last year. Moreover, the Nasdaq Biotechnology Index was up 21.63% percent in 2017. Analysts expect this growth to continue in 2018 too.
2017 was also a record year for venture capital (VC) funding in biotech and genetics. Biopharmaceutical companies saw 37% more VC funding during the first quarter of 2018. Companies labeled solely as “biotech” gleaned $1.922 billion, nearly half of total VC biopharma financing (48%).
A Forbes article reports that VC firms have invested more in biotechnology firms in the first two months of 2018 than in any year before 2014. In March, biotechnology firms raised $758 million from VCs and angel investors, according to an analysis by Pitchbook.
Here are four reasons why analysts are bullish on the biotech industry:
- The biotech industry is continuously evolving with advances in the medicinal space. Biotech companies have developed treatments for diseases like cancer that have stumped doctors for years.
- The FDA is expected to approve more biotech diagnostic tools and biopharmaceutical products that can disrupt the market. These products are unique, which means that they are patentable.
- Large-cap pharmaceutical companies are acquiring smaller biopharma and biotech firms to be able to use their research and technologies to achieve growth in a mature market.
- The drug industry used a price hike to expand on profits in the past, but that may not be enough to boost earnings this year. Mergers have the potential to help pharmaceutical companies expand their portfolios.