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Life sciences industry outlook: Fall 2022

Sep 14, 2022

Life sciences industry outlook key takeaways

Signs point to a very quiet market for deal-making in the biopharma sector so far in 2022, whether looking at public markets, private markets or licensing deals.

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An aging population battling chronic diseases will continue to drive strong compound annual growth in the medtech sector.

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Industry-funded and interventional clinical trial studies are at record levels, with no sign of dropping significantly in the near term.

Life sciences Economics

Looking ahead, life sciences companies will encounter fundraising challenges and increased competition for experienced and highly skilled talent, as well as fallout from volatile economic conditions. However, opportunity is always on the horizon for many businesses in the biopharma, medtech and life sciences services sectors. We explore what’s happening and what’s to come.

With the recent news that U.S. gross domestic product declined in the two most recent quarters, the overall U.S. economy faces a real risk of recession. In this context, it is important to understand the current state of the biopharma sector. The capital markets for biopharma assets are currently challenging, whether seen through the lens of valuations, access to the initial public offering market or difficulty in raising new capital.

As a service industry, life sciences is experiencing pressure on earnings due to inflation and limited skilled labor. While many contract research organizations have intended to pass cost increases on to sponsors as new business is awarded, a funding slowdown for middle market biotechs means that CROs may experience increased pushback from sponsors as companies plan to maximize their limited liquid assets.

Despite the temporary underperformance, the index for health care equipment remained ahead over the 10-year period. We expect volatility will remain high and valuations will continue to retrace if the Fed maintains its tightening of fiscal and monetary policy. However, we expect performance for the medical device sector over the long term will continue to outperform the S&P 500 overall, as demand for and sales of medical devices are expected to remain at all-time highs.

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