It is the second highest value of all time: the German biotech industry raised 2,4 billion euros as capital. Biotech companies are increasingly appearing as buyers and the shortage of skilled workers is increasing: all the results of the analysis have now been published in the German Biotechnology Report 2022.
In the fight against Corona, the German biotech industry showed what it can do. But even without the exceptional funding for vaccine development against COVID19, the companies are continuing to develop and are showing that they are among Germany's innovation engines. After 2020, with around 3,1 billion euros, the record year for raising capital, companies collected 2,4 billion euros last year - the second-best annual result of all time. Compared to 2019, funding increased by 170 percent. So the high-altitude flight continues, albeit slightly slowed down.
If you look at the two COVID19 vaccine developers BioNTech and CureVac, the supposed slump in financing through IPOs, venture capital, follow-up financing and convertible bonds is also put into perspective: A year ago, the two companies combined around half (51 percent) of the total capital raised. This year, on the other hand, it is only 18 percent. In 2021, among other things, a more even distribution of investments could be observed in venture capital - across different companies and different therapeutic areas.
These are the results of the German Biotechnology Report 2022 by the auditing and consulting company EY.
It is true that individual companies continue to have a disproportionate influence within the German biotech industry. But: “In contrast to previous years, it is not just individual events that determine the financing. This is a clear sign of the stability of the industry and the trust the market has in the company," says Dr. Alexander Nuyken, EY Partner and Head of Life Sciences Strategy & Transactions in the EMEIA region.
Trust that was gained not least through the fight against Corona and for health. The novel vaccines, which help us return to our usual everyday lives, show the potential of novel therapies beyond their use against COVID19. However, the activities of German biotechs have not been limited to the pharmaceutical and healthcare markets for a long time. They also bring innovative technologies to other sectors such as agriculture, the food industry and the chemical industry - and thus to almost all areas of life.
Four IPOs worth almost 700 million euros
The sums of follow-up financing (874 million euros, down 43 percent), venture capital financing (752 million euros, down 15 percent) and convertible bonds (139 million euros, down 71 percent) all fell compared to the record year 2020. However, it is pleasing that four IPOs brought in a total of 667 million euros. This means an increase of 52 percent compared to the previous year. It is also the highest IPO capital raising ever achieved through two first and second listings on the NASDAQ. It should also be noted: "There is a clear trend away from so-called 'drip feeding' in early-stage financing," says Nuyken: "Companies receive the necessary financial resources from the start to directly enable the necessary advances in their development."
In addition to strong growth figures for the sales of listed biotechs (plus 551 percent), research and development expenditures also increased here to 2,76 billion euros (plus 89 percent). The alliance volume developed less positively: After almost 7 billion euros in the previous year, only 2021 billion euros are booked for 3,39 - a minus of 51 percent. The slight increase in the number of deals shows that partnerships between companies are still important. It was 2020 last year from the 33 low when it was 48.
Nuyken: “Thus, the development in Germany ran counter to the global trend. The main reason for this weak development is that the market for mergers and acquisitions in Germany is still relatively strong, as well as the relatively strong capital resources of the companies, which allow them to go a long way in development on their own. Overall, however, the global trend towards more partnerships will not go unnoticed by Germany. Mergers and acquisitions, IPOs and partnerships are in constant competition with each other, and the capital market collapse and high valuations for mergers and acquisitions are strengthening partnerships as an alternative.”
German biotechs are increasingly appearing as buyers
As in previous years, innovative technology platforms were the value drivers in the alliances of German biotechs - this was particularly evident in the mega deals (over 500 million euros).
As in the previous year, there was also a mega deal in the area of mergers and acquisitions: MorphoSys took over the US company Constellation Pharmaceuticals for EUR 1,41 billion. Four other deals were also above the 100 million euro mark, with the total volume rising to 2,06 billion euros - the highest value in the biotech industry's history. A total of 21 deals were recorded.
A look at the period of the past 20 years also shows that the number and volume of M&A deals are increasing, a trend that could continue: “Companies in the biotech industry currently have plenty of liquidity. This means that the companies can act independently. In the future, however, in connection with imminent patent expirations and a calmer IPO market, a further increase in mergers and acquisitions is to be expected. German biotechs will also appear here as buyers as part of their growth strategy.”
In order to continue to secure growth, the industry is dependent on qualified employees - but it is also evident in the biotech industry that the shortage of skilled workers is acting as a brake on growth. The number of employees at listed biotechs increased by twenty percent and now stands at 17.301. But in an empty labor market, companies not only compete with each other for the best talent, but also with other sectors. “Employers can and must stand out with modern, innovative offers in order to attract and retain talent. This is where the management is asked above all - to convince the brightest minds of their company and their ideas with individual measures.
However, the development of management talent is also critical. Better networking and targeted mentoring of start-up teams help to avoid mistakes when founding and developing companies. Much more can be done here,” says Nuyken.
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