Since the outbreak of the Covid-19 pandemic in 2019, healthcare has been a sector that has gained prominence in the last 18 months or so. Investment in healthcare skyrocketed in the last year. According to McKinsey, between 2019 and 2020, biotechnology companies saw a double digital growth in fundraising from venture capitalists. The number of biotech companies going public also increased threefold during the period. It is also outperforming pharmaceuticals. So, is the growth of biotech companies Covid-19 induced or will the sector manage to sustain the growth for a longer period of time? What we can say is that given the fast-paced advancement in biological science and the developments in technology such as artificial intelligence, the potential to take innovation to a new level is very high.
Impact of Covid-19 on the biotech industry
The Covid-19 pandemic’s impact on the biotech industry will be the widespread and long-lasting. The biotech industry had an instrumental role to play in the development of Covid-19 vaccine, that too in record time. But the pandemic’s role in shaping the industry won’t fade away even as the vaccines are administered across the globe.
Over the last two decades, we have witnessed a number of epidemics, be it SARS in China, Ebola in Africa, or the Covid-19 epidemic, also in China. What has changed now is people are aware that the possibility of another pandemic in the near future is moderate to high. Covid-19 pandemic caught us off guard. The healthcare sectors in many countries were stressed beyond imagination.
Given the advancement of technology, there is also a chance we could possibly predict where the next pandemic will break out and even develop a cure to prevent casualties. The biotech industry needs to need to prepare for adverse events because they will happen.
More broadly, what Covid-19 has done is that it brought biological science to the attention of healthcare workers, agencies, governments as well as the general public. So, biotech companies and their ecosystems are expected to continue to scale up rapidly and keep riding the wave in the near future.
Rise of the biotechnology sector
Buoyed up by advances in science and technology and the Covid-19 pandemic, the biotech sector attracted record levels of investment through 2020 and into early 2021. VC investment in biotech companies across the globe grew by 45 percent in a year, taking the 2020 global total to $36.6 billion. While the US was on the top when it comes to investments, Europe was not far behind followed by China. Particularly in Europe, funding size grew at more than twice the rate than in the US, according to McKinsey. While in China, the number of funding rounds increased fourfold when compared to Europe and the US.
Deals such as partnerships, joint ventures, licensing agreements also doubled between 2019 and 2020 to reach $170.6 billion. During the period, we witnessed biotech companies partnering with big pharma companies, other biotech companies and a broad range of other organisations. Many big pharma companies have also acquired biotech companies to sustain their portfolio strategy while also pursuing pipeline and top-line growth.
Biotech companies across the globe raised $34.3 billion in 2020 by going public, an increase of 186 percent on the previous year. It is, without doubt, IPO activity has grown faster than any other category of fundraising. While most of the biotech companies that went public were located in the US, companies in other parts of the world such as China, have also seen significant growth in the past few years.