Apeiron Investment Group
- Top biotech investor Christian Angermayer expects a wave of biotech bankruptcies in 2023.
- It could be a signal to other industries that the economy won’t be recovering any time soon.
- During the 2008 recession, biotech companies also struggled with mass layoffs and restructuring.
Biotech companies are being crushed by the tough market, and it’s not expected to get better anytime soon.
That’s according to billionaire biotech investor Christian Angermayer, founder of Apeiron Investment Group.
Angermayer told Insider that as the economic slowdown continues into 2023, he expects a wave of biotech companies will fail to receive funding and eventually go bankrupt.
“There will be some great science that unfortunately will not come to fruition,” he said.
Most biotech companies are still pre-revenue, which means they are hit hard and fast when economic slowdowns occur.
That’s because companies developing new drugs don’t tend to make any money until the drug comes to market. And to make that happen, the companies need an average of ten years of research, and often more than one billion dollars, to fund clinical trials and generate data that shows the drug is safe and works on patients.
“Unfortunately for biotech and pre-revenue companies, they are a canary in the coalmine,” Angermayer said. “Inflation hits non-cash flow positive companies hardest and first since the market is always forward-looking, and only later starts to eat the margins of cash-generating enterprises.”
The biotech industry has been struggling since last year and it’s only now that many other companies, like those in big tech, are starting to catch up. Soon, economists predict that the whole country could face a recession.
This pattern has been seen before. In the massive 2008 recession, biotech companies were hit hard and early as venture capital funding faltered. Tens of thousands of jobs were cut and a host of research efforts were either paused or abandoned all together.
We’re already seeing a wave of biotech layoffs in 2022. At least 118 companies in the space have laid off staff this year, according to a layoff tracker published by Fierce Biotech.
Several years after the 2008 recession, the biotech sector did bounce back. In 2011, biotech companies raised $4.82 billion from venture capitalists, a significant increase from prior years according to Reuters.
And despite a tough economic landscape, some companies may still be able to convince investors that they’re worth taking a chance on right now. Angermayer said he believes that VCs with an eye for the future will still be willing to place big bets into the right companies.
And other VCs previously told Insider that they were beginning to adjust their priorities amid the economic downturn, prioritizing startups with a quicker path to generating revenue rather than placing large bets on interesting but risky investments.
