Biotech Vs. SVB Collapse: What's Next?

Unless you have spent the last few days in hibernation, I'm sure you will have seen a multitude of headlines around the collapse of Silicon Valley Bank. But what does this mean for the Biotech Industry?

Last Friday, SVB closing sent shockwaves throughout the sector. SVB have long been known for partnering with Biotech start-ups to assist with funding and helping with mergers, acquisitions and IPO's.

Dozens of Biotechs issued frantic statements over the weekend to retain investment & calm employees in attempts to stay afloat.

The fate of the bank remains unknown, however, there are plans for an auction to be held at a later date.

According to the UK BioIndustry Association (BIA), around 40% of the UK's Biotech companies bank, or have banked, with SVB's British arm.

Given the longevity of process and the huge capital required to develop therapeutic assets, early-stage Bitoech companies often operate for years without a direct income stream and rely heavily upon start-up friendly banks like SVB to fund research, development and manufacturing.

This noxious blow came at the end of a shaky year for the sector with rising interest rates, recession fears and several world events resulting in a worryingly low number of investments; a fact that is not exclusive to the Biotech industry.

According to Reuters, last year in the Biotech industry there were only 47 IPOs raising a total of $4bn. This contrasts hugely with 2021 where 152 IPOs raising $25bn were completed.

A saving grace for the UK's Biotech sector came on Monday morning in the form of an announcement that HSBC would rescue the British arm of SVB, saving the heavily exposed start-ups from collapse.

"This was absolutely crucial for our sector and companies would be going down this morning if there wasn't a solution. So, on Friday, it was despair. This morning it was elation," — Steve Bates, head of BIA.

A largely positive end to what I'm sure was a traumatic and sleepless weekend for many Biotech leaders. However, this scare illustrates how heavily the sector depends on outside investment and the importance of investment and funding diversity within small to mid-size start-up Biotech firms.