A Tougher Road for Startups in Selling Their Value Story

PC: Amid a seemingly more risk-averse investment and funding climate, has it become increasingly difficult for startup or emerging life sciences companies to justify the value of their early-stage assets?

Tritschler: Last year was probably, compared to the boom years before, where everything was bought more out of this fear-of-missing-out; and very positive valuations were taken where everything would have needed to fit perfectly in order to earn this investment back later on. We’ll see these changes in the investment approach, with risk tolerance and the long-term focus that has been taken—but more in a good way where companies are looking very strategically at how they can build out their portfolios and add promising assets to them.

Overall, the investors are taking on more of a decrease-in-risk approach. So, they are looking more at the later-stage investments, staying away from the preclinical stages or discovery stages, and showing a higher risk aversion when it comes to entering into these deals. Also, when you look at venture capital, this has declined and is more difficult for companies to get.

Nevertheless, both of these elements show a very difficult and challenging environment for biotechs. However, the market is very active. We see companies with great potential out there, especially some of these startups that still have, of course, a higher risk and need to have great innovations to get funding and, then, ultimately be the target of investors. [But] there are good chances for these companies to attract investment and potential buyers.

For more on the changing trends in life sciences dealmaking, read our industry outlook analysis here.