Rise in IPOs Eases Pharma's Investment Woes

Private equity and venture capital (PEVC) deal activity decreased from 1063 in 2010 to 480 in 2013, according to a new Frost & Sullivan report. And the pharma, biotech and healthcare equipment sectors experienced a much sharper decline in investor interest than the healthcare technology and provider segments, the report adds.

But there is a silver lining to this recession cloud: the pharma and biotech returns are still better than those of other industries.

Private Equity and Venture Capital Investment in the Global Pharmaceutical and Biotechnology Industry (part of Frost & Sullivan’s Financial Benchmarking in the Healthcare Industry subscription) states that the strong comeback of IPOs last year “signals a positive outlook for investment in the pharmaceutical and biotechnology industry.”

The number of IPOs in the global biotech sector surged by 100 percent between 2012 and 2013, primarily on account of the 26 IPOs that took place in the U.S. IPOs pharma also rose with 11 deals in 2013. As a result, the report states, exit opportunities are expected to increase for investors, a trend that will be further fueled by the anticipated growth of corporate investor-backed IPOs.

PEVC investors have demonstrated the most interest in oncology drugs, followed by anti-infective drugs and pharmaceutical contract laboratories, said Frost & Sullivan’s Dr. E. Saneesh. “Industry players most aligned with these trends will be well positioned to obtain financial support from PEVC investors,” he said.