Amadeus Capital Partners

Pierre Socha

In recent years, biotech public markets have struggled to stage a meaningful comeback. In the US, the S&P Biotechnology Select Industry Index ended the fourth quarter of 2023 nearly 50 per cent lower than its peak in February 2021, and only 32 biotechs have undergone an IPO in 2023 versus 114 IPOs in 2021. Total biotech IPO funding has dropped dramatically, with only $4 billion raised in 2023 versus $17 billion in 2021.

Venture capital, on the other hand, has been resilient and provided a much-needed lifeline to fuel biotech innovation. Despite also registering a decline after peaking in 2021, with investments overwhelmingly occurring in down or flat rounds, VC funding in the US has consistently remained robust and elevated above pre-pandemic levels, averaging $5bn per quarter in 2023. While off the peak of $10bn in 3Q21, by all historical measures, this is a robust level of financing.

Investors continue to favour innovation, with Series A funding rounds accounting for almost half of all deals. Innovative platform technologies such as drug discovery enabled by machine learning and cell and gene therapies have dominated biotech funding over the past few years because they can address a broad array of indications over time. We expect these trends to remain predominant, but other areas are rapidly gaining traction. Here is a pick for 2024:

• Synthetic biology - is having a profound impact across industries, from energy to healthcare, and is expected to increase by a factor of more than 3x in market size from $9 billion in 2021 to $30 billion by 2026 . Simply put, synthetic biology is an engineering approach to biology. The goal is to create and use tools that allow us to design and build functions in cells. Our ability to engineer biology will fundamentally transform how we diagnose, treat, and manage disease. Today, modern tools like CRISPR and gene circuitry enable us to program biology with greater precision and sophistication, from bacteria that are engineered to produce new chemicals and proteins to cells that are engineered to attack cancer. Biology today is arguably at the stage where information technology was 50 years ago, on the precipice of touching all our lives. Like software, biology will soon become part of every industry.

• Generative AI - Biology is incredibly complex and probably beyond the ability of the human mind to fully comprehend. AI-powered platforms have the potential to connect dots that have before looked like noise, generate new discoveries, and even change the nature of discovery itself.

This will drive new therapies, next-generation diagnostics and novel research instrumentation that allow us to detect diseases like cancer earlier, perhaps even stopping disease before it begins. GenAI has shaken many sectors in recent months. It will have a profound impact on healthcare as well. AI is enabling the creation of new solutions that have the potential to lower the cost of healthcare and improve health outcomes. Founders are responding by developing offerings that are already beginning to make an impact in parts of the healthcare industry. And importantly, per a recent study from Bain & Co ., technology buyers in healthcare are responding by developing AI strategies and starting to purchase GenAI-powered offerings. But the degree to which GenAI provides a significantly better solution than previously existed – and the pain that such a solution addresses – are the two most important factors that matter to healthcare technology buyers. While it will shake things up in R&D in the mid-term, we expect to see the first-generation GenAI applications tackling bottom-line-driven offerings such as note-taking, prior authorization, billing, and clinical trial management . Early adoption will be about operational efficiency.

• Care delivery - large hospitals are complex structures housing a vast range of services and units that have developed in a patchwork manner over decades. They were able to function optimally as long as care was provided in the manner of Ford’s production line: high volume with low variability. This one-size-fits-all approach was, until recently, the norm – from care delivery to drug discovery. We are at an inflexion point in healthcare delivery. We have a situation where the industry is expected to deliver 21st-century care – personalised, adaptive and continuous – through this rigid and localised infrastructure. The disconnect is exacerbated by a growing and ageing population, the rising prevalence of chronic diseases, unequal access to infrastructure and technological advancements, evolving payment models and higher labour costs amidst workforce shortages. We believe that substantial growth opportunities lie in improving care delivery inside the hospital and providing better intervention beyond its walls. We are at a unique moment in time where our entire healthcare system—how we access, pay for, and deliver healthcare—is being re-engineered through technology. Dynamics that have traditionally been barriers to change in the healthcare system, such as misaligned incentives and lack of transparency, are finally shifting, with the patient now becoming a powerful stakeholder in the system. Healthcare is being pushed outside the four walls of the hospital, with new models emerging every day for delivering care at community-based locations, at home, or virtually.

This next generation of companies will be built by a new generation of multidisciplinary founders with deep domain expertise. The biology companies of the future will learn from predecessors in other spaces such as consumer, enterprise, fintech, and beyond. So, just like our founders, we believe investors in this space also need to have deep expertise and experience while being multidisciplinary – to have the vision to support founders as these traditional sectors and industry lines are shifting.