A Stellar Year for Rare Disease Financings

The following is excerpted from NEXT 2021: A Time for Resilience and Ingenuity, Global Genes annual report on world of rare disease. The report will be released in February, but you can request a free, electronic edition here.

The COVID-19 pandemic didn’t hurt rare disease drug developers’ ability to raise capital in 2020. In fact, investors in the biopharmaceutical sector broadly, and the rare diseases sector in particular, had an infectious enthusiasm for funding these companies. With major market indices setting record highs despite a brief and sudden pandemic bear market, rare disease companies took advantage of the buoyant atmosphere to fill their coffers.

Rare disease therapeutics developers raised $23.2 billion in 2020 through the public and private sale of debt and equity, up from $12.0 billion in 2019, a 92.6 percent increase. Rare disease companies accounted for nearly 22 percent of the total $107.7 billion raised by biopharmaceutical therapeutics companies broadly last year, up from 11 percent in 2019, according to data from Dealforma and Global Genes.

One distinct difference in the year-to-year numbers was the absence of large financings to pay for blockbuster acquisitions. In 2018, Takeda raised $30.8 billion in a debt offering to fund its acquisition of Shire and in 2019, AbbVie raised $30 billion through debt to fund its acquisition of Allergan and Bristol-Myers Squibb raised $19 billion through debt to fund its acquisition of Celgene. As a result, total investment in biotherapeutics broadly and rare disease companies fell short of the record levels reached in 2018, but set records for IPOs and venture funding.

To calculate financial data for this report, Global Genes used the DealForma database in addition to its own proprietary data gathering. We considered only therapeutics developers for tracking purposes and did not include diagnostic, device, or other life sciences companies. We sought to get an accurate representation of financial activity in the rare disease sector. While it is not difficult to find data by indication (such as cancer, neurology, cardiovascular), companies are not categorized as rare disease companies.

Because many companies pursue both orphan and non-orphan indications, we did not want to distort these figures by categorizing a transaction or financing as rare disease just because a drug in a company’s pipeline had an orphan designation. The difference between a rare disease company and a traditional biopharmaceutical company can be particularly blurred in the area of cancer as the targeting of narrow indications can cause a large number of drugs to be considered orphan therapies. In the end, our editor and financial editor made judgement calls through multiple discussions between editor Daniel Levine and financial data editor Marie Daghlian to determine whether a transaction or financing should be most accurately categorized as general biopharmaceutical or rare disease on a transaction by transaction, product by product, and company by company basis. We have sought to be consistent in our analysis but recognize that others doing this same exercise might include or exclude companies differently.

The year in biotech financings usually gets a jump start with the annual JPMorgan Healthcare Conference in San Francisco, along with a number of shadow conferences that run concurrently. But the COVID-19 pandemic cast its shadow over capital markets at the start of 2021. Rather than bringing together thousands of biotech executives and investors in San Francisco for a week, the investment conferences that set the tone for the year were conducted virtually.

Though the wear of the pandemic on the economy could dampen investors’ appetites, the rare disease and therapeutics sectors more broadly have some insulation from the impact of the pandemic relative to sectors like retail, real estate, and tourism, all of which are more directly impacted.

The bigger concern for the industry will be questions about the future of the landmark healthcare legislation the Affordable Care Act, how the U.S. Supreme Court will rule in the challenge to the law before it, and what the new Biden administration will do to address healthcare reform. With those policy discussions there will be renewed focus on drug pricing and that could cause drug developers to become less attractive to investors and lead to questions about the economic viability of emerging therapeutics with high price tags.

OVERVIEW
VENTURE FUNDINGS
IPOS
PUBLIC DEBT AND EQUITY
PARTNERING
M&A