Financials Turning Point for Private Equity in Europe?
Five key questions for you to consider as the European Private Equity sector faces a potentially critical juncture
Healthcare
Insights from venture capital investors at the UBS Global Healthcare Conference
The ever-evolving biotech landscape has become a magnet for venture capital investment. However, the sector faces unique challenges: it has consistently underperformed against broader markets like the S&P 500 and NASDAQ, is facing uncertainty as regulations shift, and is still recovering from a pandemic-driven surge that inflated valuations and disrupted growth cycles.
Andrew Lam, Managing Director and Head of Biotech Private Equity at Ally Bridge Group, and Priscilla Sugianto, Principal at Vivo Capital, shared their insights at the UBS Global Healthcare Conference on the state of the biotech market, the trends shaping private investment, and the technologies that are driving the next wave of innovation.
The ups-and-downs in Biotech
The biotech industry has seen some dramatic ups-and-downs over the last few years, fueled by a surge of interest during the COVID-19 pandemic and tempered by the cooldown that followed. While the S&P 500 saw steady growth during that time, biotech significantly underperformed. “2020 and 2021 were anomalies in the equity capital markets,” Andrew Lam notes. An influx of non-specialist investors and overheated valuations left the market overextended, creating what Lam describes as a “hangover period” from 2022 to 2024.
The sector's recent correction has refocused attention on building solid foundations.
The market has been steadily correcting since COVID. While the growth trajectory may now be slower, it’s grounded in stronger fundamentals, with a focus on more mature companies going public.
Prospects for future growth
Looking ahead, biotech’s growth will likely hinge on several macroeconomic and regulatory factors. Following the U.S. election and potential changes in regulation, M&A activity may see an increase. “We might see the return of mega-mergers with the new administration,” Lam says. “But consolidation could mean fewer buyers for smaller biotech firms.” Sugianto agrees, pointing out that these mergers may also reduce competition at the high end, impacting smaller companies in the SMID-cap universe.
Despite some regulatory uncertainty – such as FDA user fees – both Lam and Sugianto see positive signals from stabilizing interest rates, which should improve access to capital. “If rates stabilize”, Sugianto says, “it will ease costs for biotech firms looking to finance late-stage developments.” However, she cautions about potential shifts in FDA funding. “If FDA user fees are reduced, it could delay drug approvals, affecting new treatments.”
Venture capital trends
We’re seeing more dual track approaches with our companies pursuing both M&A and IPO routes to provide optionality.
Biotech companies are increasingly choosing to stay private longer. In the current market, M&A has been a more favored exit option than IPO, as private capital continues to flow steadily toward mature assets. Sugianto pointed out that companies are at times taking “down rounds” – lower valuations than in previous funding stages – as they correct from the high valuations of 2021. “It’s the tale of two cities,” she explains, “which separates the well-funded ‘haves’ from the ‘have nots’ who are still struggling to secure capital.”
What’s driving biotech innovation?
Despite all this financial turbulence, innovation in biotech remains vibrant. Lam highlights targeted therapies as a leading area, specifically antibody-drug conjugates (ADCs) and radioligand therapy (RLTs). “We’ve overcome the engineering challenges that limited ADCs years ago,” he said, “making them a viable option today.” ADCs and RLTs, once considered niche, are gaining traction as precision treatments become more widely accepted.
Sugianto noted the growing focus on bispecific and multispecific therapies, which she believes could potentially replace CAR-T therapies as standard cancer treatments. “There’s a significant opportunity to leapfrog CAR-T,” she says, adding that CAR-T’s complexities make it challenging to scale. Lam agrees, noting that targeted radioligand therapy is also seeing broader adoption as cancer centers retrofit their facilities to support this new treatment method.
The shift toward more advanced therapies, along with adoption at major cancer centers, provides biotech with strong tailwinds for growth. “As centers make investments in retrofitting,” Sugianto says, “they’re driving demand for these cutting-edge therapies.” Lam believes, too, that this momentum bodes well for biotech, as “these investments are irreversible; once a facility is outfitted, the technology will be used.”
What does the future hold?
As biotech continues to recover from recent market corrections, its future is looking optimistic. Equity capital markets is fueling growth opportunities, and new technologies are driving innovation. However, as both Andrew Lam and Priscilla Sugianto emphasize, the industry will need to find a way to navigate market shifts and economic uncertainties to fully capitalize on these trends.
Five key questions for you to consider as the European Private Equity sector faces a potentially critical juncture
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