Text: Amino Observations
Big Pharma is accelerating mergers and acquisitions, and funds in the primary market are also on the move.
On January 3, Goldman Sachs' private equity fund "Life Sciences I" closed the fundraising window. This is Goldman Sachs' first private equity fund dedicated to investing in the biotech industry. By implication, Goldman Sachs believes that now is a good time to invest in the biotech sector.
The fund eventually raised $150 million to $650 million, making it one of the largest private equity funds in the biotech space. It also signals a return of investor enthusiasm for the biotech sector.
That's true. One day after Goldman Sachs completed the fundraising, TCGX, an investment institution focusing on the biotechnology field, also announced that its second fund had been raised, with a total size of $1 billion.
There are all kinds of signs that the most difficult time for the overseas biotechnology industry has passed.
01 When over-recruitment becomes the norm
After reaching the peak of its boom in 2021, the U.S. biotech industry took a sharp turn.
This is fully reflected at the level of IPO financing. In the first three quarters of 2023, U.S. biotech companies raised $3.4 billion. By comparison, the figure reached a staggering $16 billion in the same period in 2021.
For biotech companies, venture capital has become even more important in a challenging market environment. However, due to the cooling of the secondary market, it was also quickly transmitted to the primary market, and the amount of financing also shrank sharply.
Private equity funds in the biotech sector raised just $11.6 billion in 2023, the lowest total raised since 2013, according to PitchBook. By comparison, $25.6 billion was raised in 2022, more than double the amount raised in 2023.
But now, the situation seems to be reversed. As mentioned above, Goldman Sachs' Life Sciences I raised $150 million more than expected. According to Goldman Sachs, the fund is recognized by different investors around the world.
After "Life Sciences I", TCGX announced that it had raised a second fund, which also raised $100 million.
The above-expectations of the two funds undoubtedly show that a considerable number of investors have not lost their enthusiasm for investing in biotechnology companies. Perhaps, this is not surprising.
Over the past three years, macro factors have dominated biotech top-down pricing to a certain extent. As interest rates rose, funds chose Pharma and gave up Biotech in stages.
Now, with the end of the interest rate hike cycle and the increase in interest rate cut expectations, secondary market funds have begun to refocus on biotech. After bottoming out in October last year, XBI has risen by more than 30% so far
If the interest rate hike cycle ends, the valuation of biotech will rebound, and the acquisition cost will increase at that time.
At the moment, it seems that the funds in the primary market are also starting to move.
02 Attractive opportunities
One of the core reasons why "Life Sciences I" has completed its fundraising at this time is that Goldman Sachs believes that the investment opportunity has arrived.
First of all, Goldman Sachs believes that biotechnology has always been an area to watch. Because technological breakthroughs are transforming the healthcare industry at an unprecedented rate, these new ways to diagnose and treat diseases are worth the investment.
Second, the current environment presents an attractive opportunity to invest in the next generation of leading life sciences companies. To put it simply, Goldman Sachs can become the preferred capital provider for global core assets at a time when market funds are relatively tight.
It is not difficult to see that in order to show its strength in the field of biotechnology, Goldman Sachs has invested a lot of money. As early as 2021, Goldman Sachs completed the creation of a life sciences investment team.
The team's leader, Amit Sinha, is a veteran of the biotechnology field. Amit Sinha joined Goldman Sachs' healthcare investment banking team in 2004, advising and executing financing transactions and mergers and acquisitions for biotech companies.
From 2014 to 2021, Sinha served as Global Head of Biotech Investment Banking at Goldman Sachs, executing more than $20 billion in publicly announced and completed transactions in the biotech industry.
It is against this backdrop that Sinha joined Goldman Sachs' asset management division in 2021 to lead the firm's life sciences investment business.
From the perspective of team composition, Goldman Sachs' investment team is also very luxurious.
On the one hand, the team is made up of clinicians, scientific experts and entrepreneurs to find differentiated investment opportunities in this highly specialized and challenging field, and on the other hand, these big names have an average of more than 24 years of industry experience.
Now, with the completion of the fundraising, Goldman Sachs will also begin to buy the biotechnology industry.
03 High-quality biotech out of the trough
Regardless of whether the darkest hour is over or not, for high-quality biotechs, it is expected to continue to improve with the restlessness of these funds. After all, when the market's investment enthusiasm increases, it means that biotech financing activities will also become lively.
In terms of the direction of nuggets, Goldman Sachs has identified six tracks, including precision medicine, gene medicine, cell therapy, immunotherapy, synthetic biology and artificial intelligence.
Goldman Sachs believes that these tracks will show significant growth in the coming decades. Therefore, a layout action has begun.
目前，Life Sciences I已经向5家公司承诺了约9000万美元的投资，这5家公司分别为Moma Therapeutics、Nested Therapeutics、TORL Biotherapeutics、Septerna和Rapport Therapeutics。
Without exception, the five companies are all precision medicine drug R&D companies, and they all have corresponding technical reserves in overcoming targets that cannot be drugged. For example, Nested Therapeutics refers to itself as a "molecular hunter", and the core weapon is a three-plate axe:
Map mutation clusters onto the structural proteome, identify druggable pockets and cancer drivers, and design novel drugs optimized for these pockets.
Septerna is a company specializing in the research and development of GPCR targets. G protein-coupled receptors, the largest superfamily of receptors in the human genome, play a vital role in almost all organ systems.
Many human diseases are associated with mutations and polymorphisms in GPCRs. As a result, GPCRs are the target of many therapeutics currently in use. That's why Septerna wants to be a game-changer.
With this goal in mind, Septerna has created a native complex ™ platform that can unravel GPCRs and their native structure, function, and dynamics outside of the cellular environment, thereby functioning previously "undruggable" GPCRs as therapeutic targets.
At the same time, the R&D pipelines of the above-mentioned companies are all in the early stages and have extremely strong financing needs. If the cold winter continues, there will undoubtedly be challenges for them.
In the past year, even Biotech, which has more than $1 billion in hand, has still fallen into the dilemma of laying off employees and cutting pipelines, which is enough to show the cautiousness of the market. But now, things may be about to change, and smart money is already in action.