M&A Provides Vital Bridge for Life Science Innovation Amid Economic Headwinds, Market Demands 

Oct 30, 2023 | Blog Post

In one of the more challenging investment economies in decades, life science innovators are increasingly forced to face difficult economic headwinds and market demands in their pursuit of breakthrough treatments and cures. 

The life sciences industry weathers significant scientific and economic risks compared to other industries. Enormous upfront costs to conduct research and development, a complex regulatory environment and early dependency on outside investments for funding means life sciences companies are more susceptible to market fluctuations than other industries.  

Recently, these headwinds have verged on the extreme. In 2023 alone, 28 biotechnology companies filed for bankruptcy.The effects of these companies’ closures reverberate down to their employees, local economies and the patients who anxiously await a potential treatment or cure to come to market.  

The biotechnology company Histogen serves as one of the more recent examples of how promising, early-stage companies often struggle to transition from a singular focus on research and development to the sudden shift in pre-market expectations, particularly given the demands around clinical trials, manufacturing and distribution. In 2020, Histogen demonstrated promise for a unique regenerative tissue therapy and executed a successful initial public offering. But over the last few years, an increasingly barren investment landscape meant the capital that early-stage companies depend on for full-scale operations wasn’t there. Clinical trial enrollment challenges strained the once-promising company beyond its capacity, and Histogen was forced to begin discussing dissolution.  

“Everybody wants things to work out like they do in the storybooks. It doesn’t always work out that way,” Steven Mento, former CEO of Histogen and 30-year veteran of the industry, told STAT News in a recent article. “We did everything that we felt was appropriate in order to try and find the best pathway for the company.”  

There are 2,300 life science companies in the U.S., and many of them are facing similar circumstances to Histogen. The vast majority of biopharmaceutical companies – roughly 80 percent – already operate without a profit.  

Pro-innovation mergers and acquisitions can provide a vital bridge to help early-stage companies move from early research and development phases to the more advanced, complex stages of pre- and post-market launch. By creating a sustainable investment ecosystem and helping to achieve a broad and efficient allocation of resources across companies of all sizes, M&A helps life sciences innovators manage the highly complex and highly regulated biopharmaceutical marketplace. With potential new treatments and cures on the horizon across dozens of disease areas, encouraging strong M&A activity will be critical to ensuring that these breakthrough treatments make it from the lab to the patient.