Life Sciences & Investment Banking: Valuations, Deals, Industry Outlook

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The Life Sciences and Investment Banking sector is defined by rapid technological advancements and regulatory complexities, driving the need for specialized financial expertise. As 2024 progresses, the sector remains a hub of innovation, pushing the boundaries of biotechnology, pharmaceuticals, and medical devices. This environment, while rich in opportunity, presents unique challenges for valuation and strategic transactions.

Specialized valuation and deal-making expertise are critical in this context. Life Sciences companies operate in a landscape where scientific innovation, regulatory hurdles, and market potential significantly influence their value. Traditional financial metrics fall short in capturing the full potential and risks associated with Life Sciences ventures. Factors such as the progress of clinical trials, intellectual property assets, and market adoption rates are pivotal in assessing a company’s worth and strategic direction.

Objective specializes in navigating these complexities, offering deep industry insights and valuation approaches that reflect the sector’s distinctive dynamics. Our expertise ensures that valuations accurately encapsulate both the current status and future prospects of Life Sciences companies, facilitating strategic deals that align with their innovation trajectory and market potential.

The Unique Nature of Life Sciences Valuations

Valuing companies in the Life Sciences sector involves navigating through a maze of unique challenges, such as ever-changing regulatory requirements, the impact of expiring patents, and the unpredictability of research and development (R&D) outcomes. These factors can dramatically shift a company’s valuation overnight. Regulatory changes can alter drug approval timelines, patent expirations invite generic competition, and R&D, while the cornerstone of innovation, carries inherent risks of high investment with uncertain returns.

The life sciences industry has been very volatile in recent years but appears to be entering a new positive cycle. There was a decline in M&A activity in the industry following the peak of 2021. However, the industry is showing new signs of life this year, and there have been many new M&A deals in the life sciences space. The total deal value fell from $517 billion in 2021 to $309 billion in 2022. However, deals picked up in 2023, reaching a total value of $381 billion. Life sciences companies will likely be attractive targets for pharmaceutical and medtech companies seeking to expand their product portfolios. Life sciences investment banking activity will likely be strong this year as momentum returns.

Companies have been acquiring life sciences companies for various reasons. Many biotech companies may be searching for new sources of growth, as their organic revenue growth rate is not strong enough. Other companies may be more focused on margins, as rising interest rates have made it harder for them to maintain favorable margins to secure higher valuations in the market.

It is crucial to note that M&A activity declined sharply in 2023, experiencing the second weakest year in a decade. External economic factors, such as inflation and rising interest rates, will likely have a substantial impact on M&A markets in the future. However, the life sciences industry has been a bright spot due to its favorable growth prospects and historically lower valuation. This favorable momentum will likely carry into 2024 as life sciences companies seek to exploit some of the growth trends in the market.

At Objective, we blend deep industry knowledge with specialized valuation expertise to tackle these challenges. Our team understands the intricate dance between regulatory landscapes, patent strategies, and the potential of R&D efforts. This understanding is critical not just for assessing current value but for forecasting future worth in a sector where tomorrow’s breakthroughs are today’s investments.

Our strategy focuses on marrying the detailed, hands-on knowledge from our M&A advisory work with the analytical rigor of our valuation practice. This combination allows us to offer nuanced, realistic valuations that reflect both a company’s present situation and its future possibilities. It’s not just about numbers for us; it’s about providing a clear, well-rounded view that helps Life Sciences companies navigate their strategic paths with confidence.

M&A Trends and Deals in Life Sciences

One recent trend in the life sciences industry has been the rise of Contract Research Organizations (CROs) and Contract Development and Manufacturing Organizations (CDMOs). These companies can support life sciences companies, especially some of the smaller, emerging companies with a promising pipeline. The top 15 pharmaceutical companies’ clinical pipeline share fell from 40% in 2011 to 20% in 2021. In this case, many smaller life sciences companies may be able to gain global market share and rely on CDMOs and CROs, while larger companies become more conservative and keep services in-house.

Due to the competitive nature of the life sciences industry, smaller companies in this industry may be best served by exploiting some of the relationships and knowledge of CDMOs and CROs to help build their image in the market. These companies can help smaller players successfully launch their pipeline and even attract potential investors.

There have been many new entrants in this space, as CROs and CDMOs have helped companies expand their offerings. These companies can help companies launch innovative products and address some of the medicine shortages. CROs and CDMOs may be one of the key drivers that helps a new vaccine or medicine successfully reach the market.

Tonix Pharmaceuticals recently announced that it engaged CRO Rho Inc. to help it submit its new drug application to the FDA. Tonix is creating a drug to help treat fibromyalgia and capture the growth of the global fibromyalgia drug market. Moreover, some companies creating products in the global single-cell omics market have also recently relied on CROs to improve their operations.

Many companies in the industry are expanding their services to offer support to promising life sciences companies. PharmaOffer, a digital tech platform, recently announced that it plans to address some of the medicine shortages in the market by offering these services to companies in the industry by establishing a CRO and CDMO. Moreover, PQE Group also recently established a new CRO to help support its growth abroad in countries like Canada, Saudi Arabia, Ireland, and Singapore.

According to Market.Us, the global CDMO market will grow at a CAGR of 7.2% through 2034. These companies have ample growth potential because they can help companies develop drugs, secure approval from the FDA, and improve the manufacturing process. Moreover, some consumers are beginning to prefer products from smaller companies, and many of these companies may need to rely on CDMOs and CROs.

Industry-Specific Challenges and Opportunities

One of the paramount challenges is the regulatory environment, which is both a gatekeeper and a guideline for innovation. The rigorous process of obtaining FDA approval, for instance, is a significant hurdle, with only about 12% of drugs that enter Phase 1 clinical trials eventually making it to the market. This low success rate, coupled with the average cost of bringing a new drug to market reaching approximately $1.3- $2.6 billion, underscores the high-risk nature of Life Sciences ventures.

Supply chain issues have been a key issue for companies in many industries since 2020. A recent Deloitte survey found that 88% of life sciences respondents cited that they were facing logistics or production issues. At the same time, companies are also facing pricing issues, as measures like the Inflation Reduction Act may also pressure companies and make it more difficult for them to move towards profitability. 

Companies will also need to increasingly utilize technology to help improve their operations. A 2023 KPMG survey found that life sciences companies lagged behind other companies in areas like AI, automation, cybersecurity, data and analytics, and emerging technology.

Market access represents another significant challenge within the sector. The global trend towards healthcare cost containment, encompassing price controls and health technology assessments, creates complex hurdles for the commercialization of new products. A multifaceted approach is required in order to ensure that new therapies and technologies can effectively reach patients. This approach involves navigating pricing and reimbursement strategies, conducting health economic outcomes research (HEOR), complying with regulatory considerations, and engaging with stakeholders to secure coverage and payment from payers, including government health agencies, insurers, and managed care organizations.

The challenges extend to balancing the need for profitability with the imperative of broad patient access to life-saving therapies, addressing disparities in healthcare access and affordability, generating robust evidence of a product’s clinical and economic value, and navigating the complexities of Health Technology Assessment (HTA) processes in different regions. 

Navigating Investment Dynamics and Supply Chain Innovations

One notable trend is the biotech investment slowdown. After a period of unprecedented growth, the sector is experiencing a cautious recalibration of investment strategies. With rising interest rates and a broader diversification of investments, biotech firms are faced with a reduction in capital flow. This scenario mandates a strategic reevaluation, urging companies to prioritize and invest in specific assets within their pipelines, underscoring the sector’s high-risk nature further.

Some of the top targeted areas in 2021 included Cell Therapy 2.0, mRNA technology, precision medicine, gene therapies, drug discovery by machine learning, and new delivery methods. There was a strong hype cycle in 2021, as deals picked up, and then M&A activity sharply declined in 2021. However, many of these innovations will create a lot of value this decade, and larger companies in this industry will likely still be targeting new M&A deals. Consequently, M&A transactions grew strongly in 2023 despite the general slowdown in M&A activity, and there may be more life sciences investment banking activity in 2024.

Parallelly, the spotlight on supply chain vulnerabilities, exacerbated by the COVID-19 pandemic, has spurred a renewed focus on securing and optimizing these critical networks. The shift towards onshoring, driven by geopolitical tensions, illustrates a strategic pivot from East to West, despite the emergence of Asian CDMOs as key players in the industry. This development highlights a global effort to domesticate supply chains, preparing for future pandemics and ensuring a more resilient infrastructure.

Embracing Novel Modalities and Partnership Models

The life sciences industry’s pursuit of innovation is vividly reflected in the continued explosion of advanced novel modalities, such as cell and gene therapies, CAR-Ts, and oligonucleotides. Despite facing regulatory challenges and the complexities of commercialization, the relentless focus on these groundbreaking treatments demonstrates the sector’s commitment to pushing the boundaries of medical science.

Moreover, the evolution of partnership models presents a significant opportunity for growth and innovation. The fragmented nature of the life science outsourcing market, with over 400 players in the biopharma CDMO space alone, necessitates a move towards more innovative, risk-sharing models and flexible collaborations. This trend underscores the industry’s shift from traditional fee-for-service arrangements to partnerships that maximize value and conserve capital.

AI: The Frontier of Innovation

The transformative potential of AI and digitization in the life sciences cannot be overstated. As we progress through 2024, AI’s role in streamlining drug discovery, enhancing clinical trials, and improving overall efficiency becomes increasingly central. Companies that harness AI-enabled platforms are positioned as attractive partners, offering significant advantages in terms of speed, efficiency, and innovation capacity.

The adoption of AI in drug discovery has been further exemplified by pharmaceutical giants such as AstraZeneca and emerging biotechs, each leveraging AI to optimize various stages of drug development, from target identification to clinical trials. AstraZeneca’s collaboration with BenevolentAI and Illumina, for instance, has generated AI-derived targets for diseases like idiopathic pulmonary fibrosis (IPF) and systemic lupus erythematosus (SLE), showcasing AI’s potential to unlock novel therapeutic opportunities. Moreover, companies like Absci and Insilico Medicine are utilizing generative AI to design de novo antibodies and progress AI-designed drug candidates into clinical stages, marking significant milestones in the AI-driven drug discovery landscape.

Generative AI has numerous applications in life sciences and can help improve companies’ research processes and generate new insights. AI may help in areas like single-cell RNA sequencing, synthetic gene design, and novel molecule generations, to name a few. Implementing AI may help companies more quickly develop a drug, more accurately analyze patient outcomes, or even reduce deviations in the manufacturing process. Mckinsey recently interviewed life sciences executives and projected that AI would have the strongest impact on research and early discovery, clinical development, and commercial applications.

Objective’s Role in Mergers & Acquisitions Within Life Sciences

Objective, renowned for its profound expertise in investment banking and valuation within the Life Sciences sector, has consistently showcased its capability to maximize outcomes for its clients through a deeply tailored and insightful approach. A prime example of this is Objective’s exclusive sell-side advisory role in the strategic acquisition of Supreme Optimization by Trinity Hunt Partners.

Founded in 2015, Supreme Optimization swiftly emerged as a premier digital marketing agency, dedicating its expertise exclusively to the life sciences industry. Renowned for its innovative approaches that combine cutting-edge digital marketing tactics with extensive scientific knowledge, Supreme Optimization specializes in services such as web development and design, digital strategy, paid advertising, and social media. 

The acquisition by Trinity Hunt Partners, a leading private equity firm focused on building industry-leading companies, marks a significant milestone in Supreme Optimization’s growth journey. With plans to invest in talent, infrastructure, and complementary businesses, Trinity Hunt Partners aims to enhance Supreme Optimization’s offerings, solidifying its position as a full-service agency that delivers unmatched results for life sciences clients. 

Objective’s Strategic Influence

Objective played a critical role in navigating this acquisition, bringing multiple options to the table, and focusing on aligning with Supreme Optimization’s core values and growth aspirations. This collaboration underscores Objective’s unique ability to understand and cater to the nuanced needs of life sciences companies, facilitating strategic partnerships that promise continued innovation and growth in the sector. 

How Objective Can Help

In the ever-evolving Life Sciences sector, partnering with Objective means navigating the complexities of investment banking and strategic growth with unparalleled expertise. Our deep industry insights and tailored advisory services are designed to propel your venture forward, whether you’re exploring mergers & acquisitions, seeking valuation expertise, or adapting to digital transformations in drug discovery. 
Reach out to Objective today, and let our dedicated team guide you through the intricacies of the Life Sciences landscape, transforming challenges into opportunities for innovation and success.


This article is for informational purposes only and does not constitute an offer, invitation or recommendation to buy, sell, subscribe for or issue any securities. While the information provided herein is believed to be accurate and reliable, Objective Capital Partners and BA Securities, LLC make no representations or warranties, expressed or implied, as to the accuracy or completeness of such information. All information contained herein is preliminary, limited and subject to completion, correction or amendment. It should not be construed as investment, legal, or tax advice and may not be reproduced or distributed to any person.  Securities and investment banking services are offered through BA Securities, LLC Member FINRASIPC. Principals of Objective Capital are Registered Representatives of BA Securities. Objective Capital Partners and BA Securities are separate and unaffiliated entities.

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