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Fundamentals
Size Analysis: Transaction activity in the quarter surged, with total transaction volume reaching $99 billion, marking a significant decrease from the $137 billion recorded in 2023 Q1. Notably, this trend of decreasing transaction values has been new considering the constant increase from Q1 2022 until last quarter (Q1 2023). The private market segment, in particular, experienced a decrease in activity during the quarter, while the public market saw a decline in both transaction volume and market capitalization compared to 2023 Q1.
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Public Market Dynamics: The industry has consistently lagged behind the SPY Index, although there has been gradual improvement since 2022 Q2. Notably, the top 20 companies in the industry showed a slight outperformance relative to the SPY, while the bottom 20 significantly underperformed the benchmark. Gross margin remained stable, but operating expenses have steadily increased over the years, impacting net profit margin, which has exhibited fluctuations and a notable decline since 2022 Q3.
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Transaction Trends: The quarter concluded with a total of 1,058 transactions, representing a decrease from the previous quarter. The majority of these transactions were observed in the Biotech sector, followed by life sciences. Notably, there was a higher number of public offerings compared to private placements, with both types of transactions concentrated mostly in the North American market.
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Dispersion Insights: North American markets have played a predominant role in contributing to overall industry revenue. Of the 98 M&A transactions in the quarter, a significant portion occurred in North America, followed by Asia. However, it's worth mentioning that overall M&A activity experienced a slight increase during the quarter.
Methodology
We screened CapitalIQ using its industry classification and Business Description. Transactions were filtered by announced date within the last 3 years. Companies were filtered by having a public company type. The main industry selected was "Healthcare". CapitalIQ subsectors "Biotechnology", and "Life Sciences Tools and Services" were used to screen the database. The keywords "dispensar*", "cannabi*", "marijuana", "hemp" and "psychedeli*" were excluded to screen the database. CapitalIQ subsectors "Biotechnology", and "Life Sciences Tools and Services" were used as categories. Our sectors were defined by keywords from the CapitalIQ market intelligent industry classification.
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