- In a downturn, cash may be king, but there is a problem shared – In a downturning in the economy, we expect funding to become more challenging in the biotech, pharma, and medtech areas. Those investors and companies with cash will have better options in terms of striking M&A, investment, and licensing deals on better terms, but cash-strapped companies (including smaller publicly traded companies that have been particularly battered in the market) will need to be more flexible. As a result, we expect that, from big pharma to smaller companies, there will continue to be an interest in collaboration, co-investing, and other partnering arrangements as a means of developing new product or getting later stage product to market in an efficient and cost effective way.
- Opportunity abounds for smart investors – The flip side of financial pressure on some companies is the opportunities it creates for investors and strategic buyers. They’ll be in a good position to drive better terms at lower valuations. Smart investors and strategics will act fast, although currency fluctuations may impact appetites for cross-border investments in certain markets.
- Good science will carry the day – Through all the turmoil, with good science, there will always be good opportunities, even in a challenging financial environment. Investors may need to be more selective and do their diligence more carefully, but will still flock to companies with cutting edge science in hot areas. A simple downturn isn’t likely to shut a booming industry down. Platform technologies are attracting particular interest, and the trend will likely continue as many leverage converging technologies to create platforms for a variety of therapeutic applications.
- Don’t discount China – While many U.S. companies retreated from China in the early days of the COVID-19 pandemic, China is coming back “online,” and large and small industry players are preparing to re-engage with the market. We already see more activity and interest in China, both inbound and outbound, and expect that this will increase as China further emerges from the pandemic.
- Impact investing will continue to attract more attention – Look for an increased focus on impact investing. It will not replace the economic drivers behind technology and product development, but many investors are looking to other value drivers such as lower prices, improved accessibility, and other social factors. Adopting these factors within traditional investing and company development creates interesting deal terms and presents new quandaries, such as how to tangibly and quantifiably measure the effect of impact investing. Look for further “professionalizing” of this approach to investing in biotech and pharma companies.
About the Authors:
Wayne H. Elowe is Co-Chair of Greenberg Traurig’s Global Life Sciences and Medical Technology Group and Co-Chair of the Global Corporate Practice in Atlanta. He concentrates his practice on corporate counseling, international business, and complex commercial transactions with an emphasis on mergers and acquisitions, joint ventures, strategic investments and alliances, licensing, and technology transactions. Wayne has represented clients in over 50 countries. He has more than 28 years’ experience representing U.S. companies doing business in China and representing Chinese public and privately-owned companies as their global counsel.
Fiona Adams is Managing Shareholder of Greenberg Traurig’s London office and the Co-Chair of the Global Corporate Practice. She primarily represents corporate clients, focusing her practice on mergers and acquisitions, and other transactional matters. Her work spans a range of industries, including pharmaceuticals, financial institutions, media, and retail. Fiona has broad experience working on large complex cross-border transactions.