A Real Economy publication

Life sciences industry outlook

Summer 2023

Aug 24, 2023

Life sciences industry outlook key takeaways

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Strong relationships with financial institutions and investors are crucial for successful life sciences services companies.

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Decreasing venture capital deals pose challenges for early-stage medtech companies. 

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Funding challenges persist for biopharma; companies must adapt and manage.

Life sciences trend #1: Partnerships will help companies navigate nuances of complex biomanufacturing

Despite funding challenges in the biotech sector, life sciences services companies remain resilient and attractive to investors and strategic buyers in the industry. The demand for clinical research, drug discovery, and manufacturing is increasing, driving investment opportunities. 

Mergers and acquisitions will play a significant role in the industry, with strong equity investment expected in the coming years. Partnerships will also be critical to the success of life sciences services companies, allowing for the development of advanced manufacturing capabilities and fostering innovative projects.

Life sciences trend #2: Medtech faces additional regulatory concerns, but is poised to thrive in U.S.

The performance of the S&P 500 health care equipment index has been underperforming compared to the broader S&P 500, but it has remained ahead over the 10-year period. Volatility and decreasing valuations are expected to persist if the Federal Reserve maintains its tightening of fiscal and monetary policy.

Medtech companies collecting data are working to improve accuracy, integrate it into electronic health records, and share it to enhance patient care. However, compliance with FDA cyber regulations is crucial, and the agency has announced that companies lacking cybersecurity plans related to medtech data will need to ensure compliance by October 1. 

Life sciences trend #3: Cautious optimism as hopeful signs surface in the public markets

Access to capital in the biopharma sector continues to be challenging, with the market for IPOs, private equity, and venture capital remaining sluggish. However, there have been signs of improvement. Despite IPO volume trending down compared to previous years, total capital raised is likely to surpass 2022 levels. 

However, private equity and venture capital transactions remain slow, with concerns about the public markets affecting deployment. Overall, while positive trends are emerging, funding will remain a significant challenge for biopharma companies, and they may need to adjust their financing plans and carefully manage cash balances.

RSM contributors

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