New research from the CPHI Annual Report 2023 – launched during CPHI Barcelona, the world’s largest pharma event, held at Fira Barcelona – points to an uplift ahead for biotech funding and a consequential follow through of growth for pharma contract services.

The news will be a boon to the attendees of CPHI Barcelona, which sees the largest gathering of CDMOs and comes after a year of weakening confidence. Sherma Ellis Daal, brand director, Pharma at Informa Markets, added: “We are expecting a near record event and this news comes at the perfect moment, as the partnerships agreed this week will be integral to the growth the sector sees ahead in 2024. All across the show floor we are seeing rising levels of confidence and longer term the sector looks incredibly strong.”

In fact, total funding into the sector through July is USD 30.2 Bn and for full year 2023 is trending well ahead of 2022 [Figure 2]. The only notable absence is in the continued weakness of IPOs, and this is exacerbated by clogged exits – i.e., investors who saw a pathway to exit just two years ago are now stuck until the valuations come back for former levels.

Scanlan added that while there are still ‘too many emerging pharma companies vying for too little capital’ the situation is now potentially changing. The number of companies with active R&D pipelines globally has grown from nearly 4,800 in 2020 to over 5,500 in 2023.

That’s an increase of nearly 15%, while funding levels have dropped to nearly half the 2020 levels during the same period. For CDMOs, the impact of this has been a short-term slowing of development pipelines, as biotechs look to maintain a financial cushion.

Scanlan predicts however, the market is now turning. “There are signs of an improving VC funding environment, but this needs to coincide with increasing pharma M&A and a healthier IPO environment. We believe softer demand, particularly from emerging pharma and in earlier phases of development, will extend for a period of 12-18 months. However, the investment banking community is already signalling a pickup on deal activity starting in late 2023 and accelerating into 2024.”