2021 in Review: The Future of Healthcare
Written by Ivan Sedgwick
2021 has seen a large number of life science companies come to the market, both in the US as well as the UK. Perhaps unsurprisingly, after a sustained rise in valuations, the increased supply has come with a fall in prices towards the latter part of the year. In some cases this has been due to trial or procurement delays, approval delays particularly at the FDA (both to some extent Covid-related), and also to unrealistic expectations of windfall gains from Covid testing being sustained.
Nonetheless, we now have a better capitalised universe to look at, and in particular a large number of diagnostics companies, many of which already well developed by the time they came to market. With increased American venture capital interest in the UK, and the continued buying of smaller companies by larger firms looking to fill gaps in their product lines, there should be many interesting opportunities in 2022. We have already seen opportunities created in the secondary market due to falling prices of companies that we follow. Whilst Omicron is overshadowing Christmas, the underlying picture is one of confidence that scientists can get on top of the pandemic, even if there are ebbs and flows in the battle.
At LGB, we look for intellectual property while assessing the route to market and the strength of the development plan to be funded. Good science is not always coupled with sensible financial management.
Sometimes the rewards come quickly. Arecor Therapeutics (AREC) came to the market in June at 226p. By the end of September it was over 400p on the back of a successful trial for an insulin formulation for diabetes, as well as a useful commercial tie-up.
The market does not always give credit, however. Spectral MD (SMD), which has been generously funded by the US government to develop its burns diagnostics and is well funded to apply this to diabetic foot ulcers, languishes below its listing price despite delivering trial results sooner than originally promised. GenInCode (GENI), which already has CE marking for its cardio tests and has technology largely developed by previous owners, is in the same position. We remain confident that they will do well.
Nasdaq is sometimes seen as the Holy Grail for the healthcare sector. This year, we saw another of our companies, MaxCyte, Inc. (MXCT), which we got involved with over four years ago get a Nasdaq listing. From around 450p at the beginning of the year, it hit 1200p after the listing, with enthusiasm for its unique position as a provider of testing to genomics companies. It has subsequently fallen back (now trading around 800p) as concerns emerged that genomics was proving harder to deliver therapies than had been anticipated. Sometimes it is better to travel than to arrive!