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3 trends in biotech to watch in 2020

For biotech, 2019 ended like the penultimate episode of a prestige TV show. We got answers to some weighty questions, but mostly, the year left a breadcrumb trail to some major reveals.

The IPO window stayed open, helping scores of companies go public. Futuristic therapies proved their worth in clinical trials, pointing to a new era in medicine. And the markets ended the year on a high, buoyed by a Food and Drug Administration that seems ever more flexible when it comes to approving new drugs.

Now, with 2020, we’ll get the more important answers. Sure, there’s a lot of public biotech companies now, but what if that’s a bad thing? Yes, cell and gene therapies look transformational, but what if they never make any money? And since when is everyone so confident they understand what’s going on inside the FDA?

Here are three trends to watch in biotech in 2020, a year that looks to be laden with opportunities and stumbling blocks for the drug industry.

Do we have too many biotech companies?

While every biotech startup is undoubtedly special in the eyes of the venture capitalists quoted in its press releases, 2020 could be a year marked by fatigue for the outside public.

More than 140 biotech companies have gone public since 2017, according to the analysts at Evercore ISI, and now there’s upward of 500 of them trading on the Nasdaq. Keeping tabs on them all is essentially impossible, and it’s become fairly commonplace for biotech types to see the name of a given company for the first time by reading about its implosion.

That’s arguably a good problem to have in societal terms. More biotech companies mean more efforts to treat human disease. But it could be problematic for the herd. Drug development remains an expensive proposition, and the majority of the biotech companies that went public in the past three years have negligible or nonexistent revenue. That means they’re going to have to go back to the market with follow-on offerings, and they may not like what they find.

According to Cowen’s biotech thermometer, a regular update on Wall Street sentiment, investors are increasingly selective when it comes to equity offerings, spooked by slumping IPO returns and a glut of supply. If that trend continues into 2020, some of those 500-plus biotech companies might need to look for other means of keeping the doors open, including mergers that thin the flock.

Written by: DAMIAN GARDE

Published on: DECEMBER 26, 2019

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