June 27th, 2016

Brexit and Biotech

Brexit and Biotech don’t mix.

Graph of Brexit and Biotech vs Dow

While the the biotech index is more volatile than the Dow normally, there is a sharper decline today. This is a reflexion of how Biotech will be impacted by Brexit Tweet: a reflexion of how #Biotech will be impacted by #Brexit http://ctt.ec/k24Ua+ #clinicalresearch #clinicaltrials :

  • London is a popular IPO market for many biotechs
  • Some US biotech IPOs have launched in Europe
  • European Medicines Agency (EMA) headquarters is in London
  • Brexit may impact EU companies looking to raise capital in London
  • Companies like Activas engaged in reverse mergers to move their headquarters to EU countries like Ireland to take advantage of lower corporate taxes
  • Brexit slump is on top of the February 2016 slump due to drug pricing debate
  • There will be US Congressional hearings to scrutinize drug price increases
  • There are likely to be greater currency fluctuations between the Dollar, Euro and Pound
  • New currency exchange rates may make previously arranged deals unattractive (e.g. Bayer/Monsanto)
  • R & D is increasingly global
  • Companies conduct their clinical trials globally
  • The exit will impact regulations on companies selling biotech drugs and devices in the UK

In the short run, this is another setback for pre-clinical and clinical-stage companies who need to fund their research with investor money. A sentiment echoed by Dr Banks in GEN News Pharma and Biotech Respond to Brexit:

“Short-term I expect the impact to be minimal to Pharma, perhaps a financial hit to their stock.  Depending on the burn rate of individual biotechs, the short term effect could be significant if investors are losing patience.  Probably the biggest impact long term for both will be in human resources, but this will depend on what EU exit package is negotiated between Britain and the EU. Only time will tell what that is.”
Peter Banks, Ph.D., Scientific Director, BioTek Instruments (US)