- Insiders had exclusive access to failure risk assessments to identify vulnerable biotechnology.
- The biotech market has fallen 42% this year, putting cash-starved or debt-laden companies at risk.
- CreditRiskMonitor has highlighted 10 biotechnologies at high risk of failure.
2022 was a terrible, horrible, not good, bad year for biotechnology.
The industry has suffered from the broader market environment and some specific forces of biotechnology. Overall, investors moved away from riskier growth companies as inflation and interest rates rose. That pivot hit biotechnology, an industry made up mostly of loss-making companies with heavy cash needs.
Biotechnology hasn’t helped itself either, with a wave of clinical trial failures and a lack of mergers and acquisitions. The end result was the leading biotech stock index down 42% in 2022 and about 60% from the February 2021 peak.
With biotechnology showing no signs of recovery yet, Insider obtained exclusive data from credit analysis firm CreditRiskMonitor to identify the most vulnerable biotechnologies. Analyzing more than 600 biotech companies provided by Insider, CreditRiskMonitor identified 10 biotech companies that have the highest risk of failure with market capitalizations of at least $ 50 million.
The company uses FRISK scores to assess the risk of failure over the next 12 months. The 10-point scale is used by credit and supply chain professionals to assess the financial health of companies they can grant credit or work to. CreditRiskMonitor states that 35% of Fortune 1000 companies use the service and the FRISK score has an accuracy rating of 96%.
Failures are a rare phenomenon in biotechnology. More often than not, troubled biotechnology can turn into a shell in reverse fusion agreements or simply disrupt operations. Troubled microbiome company Kaleido Biosciences did just that earlier this year, deciding to close all operations in April.
But failures still occur, particularly during severe downturns. So far this year, three biotech companies have filed for bankruptcy: Canadian cannabis and psychedelics company BC Craft Supply Co., Danish biotech Orphazyme, and Florida-based Genusx Biotechnology. In the months leading up to filing, the three companies had FRISK scores of 1, 2, and 1, respectively.