By Sam Boughedda
Morgan Stanley analysts said in a research note Tuesday that 26% of biotechnology companies need funding.
The firm estimates 93 companies will have one year of cash or less by the end of 2022, representing 26% of companies in Morgan Stanley's sample of 360 needing to finance at least one year of operations during 2022. "We estimate the financing needs to be ~$26B, which is lower than our analysis in March that yielded ~$36B by 110 companies," said the analysts.
"Previously, our sample size was 380 companies, and we estimated ~30% of the companies would need to finance in 2022. Year to date, ~$13B of funds have been raised by ~80 companies with a minimum funding size of $30M and including private investment in public equity (PIPEs) offerings. We believe most investors want companies to keep ~2 years of cash on the balance sheet and not to drop below one year of cash," the analysts explained.
The sector's performance in the past three months was said to be slightly below the average biotech needing funding, with the 93 stocks having an average return of +4% in the past three months, above the sector index (NASDAQ Biotech) return of -4% in the same period.
Furthermore, based on a subset of recent IPOs, Morgan Stanley estimates that "42 recent IPOs will need funding with aggregate cash requirements of $8B. Relative to the universe of 194 recent IPOs, this is slightly lower than the overall set as a proportion of the universe."