2023 Biopharma Funding Recap: Beyond the Surface
January 24, 2024 | Alec de la Durantaye |
Review of 2023 Biopharma Funding: How can sales and business development teams at service providers adapt for 2024?
Entering the 2023 calendar year, there was a general sense of angst when it came to economic forecasting. The last quarter of the 2022 calendar year saw elevated layoffs in the biopharma space, ultimately setting the tone for what turned out to be a difficult year for layoffs in 2023.
The collapse of Silicon Valley Bank in March was another difficult blow for the industry, casting more doubt on the outlook for the remaining three quarters of the year. From a funding perspective, we expected investors in the private and public sectors to adopt a more cautious approach, and to have a lower risk tolerance than what we've seen over the past few years.
Last year, we reviewed the global biopharma funding numbers from 2022, unpacking and comparing them to previous years. Coming off solid pandemic years, it was no surprise to see a significant dip in 2022. Now that we're past that, we can compare 2023 to 2022 on an even playing field and use the numbers to inform strategies for the year ahead. This article will provide you with a unique vantage point on the biotech and pharma industry by going beyond surface-level statistics and exploring the nuances behind the numbers to equip you and your team with the insights you need to take action.
This report is fueled by data directly sourced from Zymewire, which specifically tracks companies engaged in innovative drug development endeavors. All funding numbers are represented in $USD, let's jump right in.
Global Funding Breakdowns
Let's start by looking at a head-to-head comparison of 2022 vs. 2023.
The total funding for 2022 came out to ~ $128 billion, and 2023 totals jumped to ~ $155 billion. Last year we pointed out a few outliers (namely, Bristol Myers Squibb and Takeda) which contributed significantly to the annual totals. In 2023, Pfizer's acquisition of Seagen inflates the totals due to the $31 billion debt offering from the pharma giant. To paint a more accurate picture, this deal will be omitted from all of the following charts.
With that in mind, cumulative funding numbers for 2022 and 2023 both fall at ~ $120 billion. That kind of stability serves as a refreshing contrast to the tumultuous ups and downs we've all experienced over the last few years. Now let's separate these numbers by region.
It shouldn't come as a surprise to see North America leading the way again given the majority of biopharma companies situated in the United States and its investment model. It is interesting to see that North America put up very strong Q1 (Figure 2) numbers despite the bearish outlook entering the calendar year. That robust Q1 in North America could have influenced the subsequent strong funding quarters in EMEA and APAC regions.
To help put these numbers in perspective, we can examine the number of companies in each region that received funding, comparing 2022 to 2023.
Note: Globally, the difference in the total number of companies that received any amount of funding YoY was only one company.
The proportions seen in Figure 1 are less staggering when viewed alongside Figure 3. While the number of companies that received funding in the APAC region diminished, it's encouraging to see more companies in North America and EMEA receiving funding compared to the year prior. While the difference isn't drastic, this could be a product of investors wanting to diversify their portfolios, thereby incurring less risk.
But, even looking at the two of them side by side doesn't tell the full story. We crunched some numbers to even out the playing field and examine some of the nuances behind regional funding totals in Figure 1.1.
If we look back to last year's numbers, there are a few changes worth noting:
- North American companies, on average, received the least amount of funding.
- APAC and EMEA averages for funding per company both increased YoY.
- The % of active companies that received funding dropped across the board.
We define a company as "active" if it had at least one drug development-related event during the 2023 calendar year. While the overall decrease could be attributed to greater investor caution, it's important to note that 2022 came with a significant increase in new biopharma companies as well (526).
As a salesperson at a CRO, CDMO, or other type of service provider, your pool of well-funded prospects diminishes. These numbers indicate that 2024 could be more about survival than growth for many organizations. For those lucky enough to have received funding, it's an excellent opportunity to catapult themselves ahead of their competitors, and that requires partnerships. Business development teams that deploy targeted prospecting strategies will put themselves in a position to build long-term collaboration agreements by identifying biopharma companies that are keeping their foot on the gas this year.
Funding by Company Size
Like in any industry, the big numbers make the headlines. Headlines draw attention (competition), and somewhere down the line that creates a long lineup of RFPs.
In this section, we broke down funding totals based on company size brackets (by # of employees) and the numbers tell an interesting story, one that we hinted at in this article from early 2023.
Figure 4 shows the cumulative funding amounts for six different brackets. Small and stealth biopharma companies took home most of the cash in 2023, with over $80 billion going to companies with 500 employees or less. Now looking at Figure 5, these numbers may seem less staggering.
As we stated earlier, 2022 was a healthy year for emerging biopharma companies, creating a diverse runway for investors in 2023. For CROs and CDMOs, this should be an encouraging stat because these are the companies with the highest propensity to outsource in the years to come.
Small pharma and stealth biotech companies don't have any revenue to rely on. To get access to more cash, they'll need to continue to hit positive development milestones, the survival approach isn't an option in this case. Therefore, the focus will be to push their lead assets forward in a timely and cost-effective manner, all while navigating our industry's stringent regulatory requirements.
Those who target small & stealth biopharma prospects in 2024 will come out on top, especially those catering to preclinical research and development. Even if your company's services are targeted to later stages of development, engaging these companies early when they still have cash, can pay off (literally) later on.
Figure 6 shows the average funding amount received by organizations in each respective bracket. Drug development costs typically increase as you progress further into the cycle, and early-stage assets are typically riskier. We'd expect little change in this chart from one calendar year to the next.
Funding by State
Now let's focus on the United States, breaking down state-by-state funding totals. The life sciences present vast opportunities for states to grow their local economies and create new jobs. Since 2018, it's reported that bioscience organizations have grown their payroll by 11% and the overall healthcare industry has been the fastest-growing sector and is projected to continue to follow this trend.
While we've become accustomed to seeing the likes of California and Massachusetts leading the pack, we expect to see more states catching up over the coming years. Note that Eli Lilly (IN) and Pfizer (NY) have been omitted from Figure 7 and Figure 8.
It's interesting to see the drop-off between the top and bottom halves of the 20 most funded states. With Connecticut closing out the 10 highest funded states in biopharma (with ~ $1 billion), coming in at 11th place is Delaware, hovering just over $300 million. Keep in mind that many pharma and biotech organizations are headquartered in certain states for tax purposes.
Thanks to the strong growth of the industry, many states are making a focused effort to make the life sciences a core part of their own economies. Tennessee is one state quickly climbing the ladder, and other states on the rise include Utah, which will be host to the Society of Toxicology's annual meeting in March, an attractive conference for emerging and stealth biopharma companies (took place in Nashville, TN in 2023).
Funding by Therapeutic Area
Oncology has dominated the research and development landscape and will continue to be on top for many years to come, although we all hope to see as many viable therapeutics approved sooner than later. Looking at where funding is being placed based on the indications companies are prioritizing is a great way to forecast which therapeutic areas will grow.
Figure 9 depicts the amount of funding (in billions) given to biopharma companies based on their #1 Therapeutic Area.
Opthalmology has certainly been on the rise, making it into the top 5 most-funded therapeutic areas in 2023. Metabolic & Endocrine disease also had a strong funding year, with the success of Ozempic likely being a driving force here.
Figure 10 breaks down the number of companies that received funding based on their #1 therapeutic area of focus.
Newly Launched Biotech & Pharma Companies
In 2022, Zymewire reported on 526 newly launched biopharma companies, that's 10 per week. Figure 11 compares newly launched companies in 2022 vs. 2023, depicting a significant decrease year-over-year. Despite the slowdown, as we explored earlier, the financial health of stealth and small biopharma companies isn't a concern.
Closing Thoughts for 2024
As the biotech and pharma industry continues its post-pandemic cooldown, it's paramount for service providers to be laser-focused on the most promising areas of their target market. With the CRO and CDMO markets becoming increasingly competitive, developing a prospecting strategy that allows you to identify the low-hanging fruit, and engaging them at the right time can be a tall task. Vertically aligned sales intelligence systems have become a necessary element of business development tech stacks and separate growing organizations from those staying stagnant.
In 2024, teams should be using these systems to track funded companies in their target market, and engaging those with upcoming research and development plans. While charts and tables provide a good overview for annual planning, the opportunities lie a layer deeper, within the individual companies that make up these graphics, the ones with the right projects at the right stage of development, with a need for partners to keep them progressing to the next stages.
Thank you for reading, we wish you the best of luck in the year ahead! Subscribe to the Zymewire blog to catch our upcoming articles, including interviews with emerging biotech founders, and a brand-new guide to cold outreach to help you engage the right stakeholders, at the right companies.