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Life Science & Biotechnology

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Fundamentals

Size Analysis: In the current quarter, transaction activity demonstrates a noteworthy decline, with the total transaction volume dropping to $69 billion, signifying a substantial 48% decrease when compared to the preceding quarter. This decline in transaction values marks a departure from the consistent upward trajectory observed from Q1 2022 until Q1 2023. Concurrently, the industry's market capitalization experienced a dip to $2.4 trillion, aligning with the downward trends observed a year ago.

Public Market Dynamics: The industry has consistently trailed the SPY Index. A smoothing trend with narrowing gaps has emerged, particularly in these recent periods, mainly due to the improvement in the bottom 20 companies' performance, which have sustained modest, yet consistent growth over the last three quarters. Meanwhile, the top 20 companies in the industry demonstrated a slight outperformance relative to the SPY. The gross margin has remained stable, and operating expenses exhibit a clear decline; however, net income rebounded strongly, and continues to demonstrate volatility throughout all quarters.

Transaction Trends: The quarter concluded with a total of 964 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.

Dispersion Insights: North American markets have played a predominant role in contributing to overall industry revenue. Of the 101 M&A transactions in the quarter, a significant portion occurred in North America, followed by Europe. However, it's worth mentioning that overall M&A activity experienced a slowdown 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.

THIS REPORT IS NOT TO BE USED OR CONSIDERED UNDER ANY CIRCUMSTANCE BY ANYONE AS INVESTMENT ADVICE

This research report is for informational and discussion purposes only. Information presented here is not investment advice of any kind to any person and does not constitute a recommendation as to the purchase or sale of any interests or as to any other course of action. General, financial, and statistical information concerning the details of this report and related industry are from sources Spaulding Financial believes to be reliable.

Spaulding Financial has accurately reflected such information in this research report; however, Spaulding Financial makes no representation as to the sources’ accuracy or completeness and has accepted this information without further verification. Neither all nor any part of the content of this report may be conveyed to the public through advertising, public relations, news, sales, mail, direct transmittal, or other media without the prior written consent of Spaulding Financial. Spaulding Financial ’s research is as of the date reported herein.

Spaulding Financial has no affiliation with any of the companies comprising the industry used as a basis for research in this report, nor does Spaulding Financial hold any investments in the companies listed herein. The content of this report may be used, in part, as a basis for any work that Spaulding Financial performs for you in the future at the sole discretion of Spaulding Financial. All data is from Capital IQ database.

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