Biotechnology companies in need of cash have struggled to find financing in recent years—pushing many toward PIPE (Private Investment in Public Equity) deals and follow-on offerings. Yet only one of these options may be viable in the long-term. When the market for special purpose acquisition company IPOs crashed in late 2021 after leading IPO market volume to unprecedented heights, biotech IPOs fell hard, too. Annual deal count plummeted nearly 89% from 2021 to 2023. The biotech IPO market has improved modestly since but remains well below other recent market busy periods. The slump has been deeper than other slow periods, such as 2016. Many public biotech companies have turned to follow-on offerings to keep both the lights on and their scientists researching. Other companies have turned to private investments in public equity for relatively quick infusions of capital. Investing in biotech tends to be a riskier proposition than putting one’s money into other startups, such as technology. The tech business is known for often having started in a founder’s garage (think Amazon, Apple, and Hewlett Packard). Biotech is different. Its business model is centered on hiring scientists to conduct cost-intensive research on biological systems. Historically speaking, that type of research faces long odds to meet clinical study benchmarks, to clear the FDA process, and later to yield a product accepted by the medical community that health insurers are willing to pay for.

Full report : Biotechnology startups face a severe cash crunch and are looking for alternatives.