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January 22, 2025

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Panacea’s Huang on Biotech Market ‘Indigestion’ and Recovery

Panacea’s Huang on Biotech Market ‘Indigestion’ and Recovery image

Overview

James Huang, MBA, founder of Panacea Venture, discusses evolving biotech trends and the shifting venture funding landscape.

James Huang, MBA, founder of Panacea Venture, Discusses Biotech Marketplace Values

As the biotech sector recovers from a significant downturn that began in 2021, industry veteran James Huang, MBA — founder and Managing Partner of Panacea Venture, a Cure Collaboration Residency company — foresees a slow rebound.

In a conversation with Cure, Huang discussed the challenges and evolving trends within biotech, highlighting the “indigestion” caused by an oversaturated market and the shifting landscape in venture funding and global asset acquisition. Huang’s insights shed light on the pressures and potential pathways to stability for the biotech field in the coming years.

This interview has been edited for length and clarity.

Cure: What kinds of changes have we seen in the formation of new biotech companies?

Huang: From the 1980s, when the first company — Genentech — went public, and up to about 2013, we created somewhere close to 300 publicly traded companies. In the following eight years, just before the downturn of 2021, the industry somehow packaged and pushed out about 500 companies to the public market. So, in a very short period of time, there were almost twice as many companies created as there were in the prior 30 years.

That happened because the capital markets became very rosy. There was an abundance of capital and shorter fundraising cycles. The fundraising cycle became 12 to 18 months, but the funds became bigger.

The market can digest only so many packaged publicly traded companies, so we're now suffering from "indigestion." Some of the companies should never have become publicly traded.

As a result, we saw a dislocation in many ways of the true value of a company as well as the number of companies that we're seeing in the marketplace. The intrinsic value of some of these companies is less than that of some private companies.

Cure: How do you think we'll address this indigestion?

Huang: We're now working through this indigestion, and it's going to take a couple of years more.

If we have the same amount of capital chasing the exciting, promising biotech companies, there will be much better value. If people are much more disciplined in the way they price initial public offerings (IPOs), we'll have a very constructive, healthy recovery and hopefully go back to a more normalized biotech market, where private companies will have better access to capital.

Cure: What has been happening in the healthcare venture world so far this year?

Huang: In the first half of this year, the number of venture deals was at an all-time low, but the average size of each deal has been at an all-time high dollar amount. We're seeing a lot of mega deals being put together very early on.

Historically you wouldn't see deals greater than $50 million, but now we're seeing deals that are over $100 million and even a billion dollars in funding at one time — for the first time in history. We're seeing a "crowding effect" of some larger funds entering into the same deal, even though the number of deals is actually quite low. And that trend will continue.

Cure: Are there any other biotech or investment trends you'd like to comment on?

Huang: In the past 18 months, because of the geopolitical decoupling between the United States and China, we've been seeing an increasing number of multinational pharmaceutical companies, including large biotechs, going to China to buy and license assets.

As the decoupling happened, U.S. dollar investment into China by venture and private equity firms has pretty much dried up. For those companies to survive, many of them are licensing and big pharma is taking notice, because of the innovation that's happening in that part of the world.

So, they're going there to pick up assets. That's a new trend that we've seen in the past two years, and we believe it will continue to increase. Even large, well-known venture funds are going to China to pick up assets, bring them back to the U.S. and form new companies.

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