[ad_1]
Biotech companies are racing to assess the damage from the failure of SVB Financial Groupthe latest issue that many of the startups face in making money.
SVB, yes crushed Friday after the run of assets, there is a big role in the financing of the early stage of life sciences and health care companies. Venture-backed health companies accounted for 12% of SVB’s $173 billion in deposits and 36% of the $168 billion in funds held on year-end balance sheets.
The SPDR S&P Biotech ETF closed up 3.9% while the Nasdaq The Biotechnology Index fell 1.6%. The S&P 500 fell 1.5%.
Like technology companies, biotech companies find themselves in a difficult spot trying to decide what to do with the money held by SVB, “an important financial partner” for industry, John Maraganore, the former chief of Alnylam Pharmaceuticals Inc. which is linked to several investment companies and biotech boards, said in an interview.
The collapse of the most prominent bank for venture-backed companies has dealt another blow to an industry struggling with a long-term decline. Biotech companies have been under intense pressure for more than a year as pandemic-fueled growth cooled and investors began to shun risky assets amid rising interest rates.
Most biotechs are examining their exposure and starting to develop ways to reduce it, Maraganore said early Friday. He said the last 24 hours were full of email exchanges and board calls on how to proceed.
Venture Capital
The labs of a startup incubator in Cambridge collapsed on Friday morning as the collapse of SVB appeared to be imminent, said Isaac Stonerchief executive officer of closely held Octagon Therapeutics.
“People in the lab, people in the office, everybody’s talking about it,” he said.
Venture capital firms that fund other types of emerging health companies are also feeling the SVB’s vibration. Bill Geary, co-founder of Flare Capital Partners, a venture firm focused on early-stage investments in health technology, said all of the company’s portfolio companies were somewhat affected. Geary called the implications “profound” because SVB plays a vital role in the health care ecosystem. As interest rates continue to rise, SVB’s collapse could contribute to more negativity about the ability to raise capital, Geary said.
“You can’t look at any of these things in isolation,” he said. “They all have a complex negative effect. This is just one example of how a financial institution that is important in the value chain is seriously affected by the increase in interest rates.”
So far, public biotech companies appear to be protected from serious harm. Most of those Evercore ISI analyst Josh Schimmer who was interviewed said that they have limited exposure and do not expect any material risks to their balance sheets.
“I haven’t seen any company that has any material risk from this perspective, but there may be some disruption down the road,” Schimmer said Friday in a discussion with Twitter spaces.
luckThe CFO Daily newsletter is the must-read analysis every finance professional needs to keep up with. Sign up now.
[ad_2]
Source link