Uncharted Waters: How Biotech Navigates in a Post-Covid Market
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It would be an understatement to say that the global COVID pandemic caught the world by surprise. In 2020, the coronavirus pandemic sent the world into a recession and sent equity markets reeling as the S&P 500 plummeted nearly 20%.¹ But then in 2021 the S&P 500 bounced back and rose nearly 27%.² Go figure. But what in the world is going on in biotech? Biotech collapsed some 25% overall in 2021 and here in 2022 we are already down nearly 20% after the first month.³ One barometer in particular is the SPDR S&P Biotech ETF (NASDAQ: XBI) that shows a cumulative drop of about 50% in the last year. That’s the largest cumulative drop in its history. ⁴
“The market appears to be correcting itself” said Jeffrey Jones, Managing partner at The Deerborne Group. From March 2020 to February 2021, we saw an unprecedented increase of approximately 150%. Virtually every biotech stock rose day after day for no compelling reason at all. ⁴ Growth like that simply can’t go unchecked for too long. Throw in the inflation that we’ve seen in the last year, the Fed’s raising interest rates, skyrocketing oil prices, and now the Dow’s recent drop due to the Russian invasion in the Ukraine, and you literally have what appears to be a dumpster fire going on in biotech.
It’s been estimated that there are currently some 700 publicly traded biotech companies in the US vs. 125 or so just a decade ago. In 2020, more than 75 biotech companies went public and in 2021 there were over 100 (this doesn’t take into account all the SPAC mergers).⁵ It’s going to take time to for the market to take in and digest all this turmoil,” said Jones. “But it feels like biotech stocks prices, many at historic lows, may have finally bottomed out.” Given the historic lows, one could argue that there are number of highly undervalued small biotech companies in the market.
With biotech market capitalizations plummeting, it’s understandable that these companies are being cautious about spending the windfall that they experienced in 2020. Companies like San Diego based Quidel (NASDAQ: QDEL) were literally printing money the last two years while selling their various rapid point-of-care COVID tests. Now they now have this huge, billion-dollar war chest to invest. In December 2021, Quidel announced that they were buying the clinical diagnostics business from Ortho (NASDAQ: OCDX) for $6 billion looking to become one of the leaders in the global in-vitro diagnostics (IVD) marketplace. “Jumping into the traditional IVD market is a departure for Quidel that has been such a dominant player in the rapid point-of-care diagnostics market,” said Jones. The downside to such a deal however is that Quidel’s stock got hammered on the news. But Raymond James sees a different future and recently upgraded their stock to a “strong buy” based on the combined opportunity.⁶ So, time will tell.
Redefining Management Consulting:
The Deerborne Group is a boutique management consulting firm that advises corporate, venture capital, and private equity firms on commercial, operations, and corporate strategy. The firm focus exclusively on biotech, in-vitro diagnostics, and the life sciences. “We help our clients identify opportunities, minimize risks, and navigate their most difficult management challenges,” said Jones.
Having been in senior executive and C-suite roles previously himself, Jones, a long-time industry IVD veteran, stepped away from the corporate world in 2019 to start The Deerborne Group. In the past, Jones had used several of the larger management consulting firms at various times during his career. But each time he grew more and more dissatisfied with the value he was getting and eventually started using smaller boutique or even independent consultants that had the industry-specific expertise he needed. He felt like he got greater insights and better value for his money from consultants that had decades of real-world hands-on expertise. Those experiences stuck with him and when he decided to open The Deerborne Group, unlike the large traditional consultancies with their brick and mortar and matching large overheads, Jones decided to employ a network-based model comprised of subject matter expert consultants to open his firm with. This model isn’t necessarily new but with all the turmoil in biotech, clients appear to be more cautious and are definitely looking for greater value when it comes to managing their consulting spend moving forward.
The Deerborne Group is attractive because it offers an alternative to the expensive large consulting firms that have a seemingly endless pool of inexperienced and recently graduated MBAs, albeit with mad Microsoft Office skills, to throw at a problem. The large consulting firms sell their experience and rely on their reputations while The Deerborne Group sells their real-world, hands-on subject matter expertise acquired over decades in the industry. “There’s a huge knowledge gap between experience and expertise,” said Jones. Each of their consultants come exclusively from the industry, some with decades of hands-on expertise, and many who are recognized subject matter experts themselves.
Differentiated Consulting Services:
Wanting to differentiate The Deerborne Group, Jones set about recruiting and building a network of seasoned consultants from day-one. Each of his consultants brings with them a unique and different set of skills and depending on the engagement, he’ll match the specific skills set needed to successfully complete the engagement. They see this as a value-added benefit that offers his clients a more straight forward and cost-effective way of doing business.
Take for instance their scientific advisory board (SAB) that they formed in Q4’21, “We are extremely proud to have such an accomplished and distinguished group of internationally recognized scientific and clinical experts join our inaugural Scientific Advisory Board,” said Jones. “As we work to advance and differentiate the innovative consulting services that we offer our clients, we are eager to begin leveraging the collective expertise and strategic counsel that our SAB brings with them and provide those insights to our clients.” The Deerborne Group now offers “Insights on Demand,” a virtual advisory service comprised of those same SAB members and more. Depending on the client’s individual needs, they are now able to request virtual access to any one of The Deerborne Group’s SAB members or book the SAB as a whole. Whether a venture capital firm, private equity group, or a corporate client needs input on an acquisition or advice on how best to mitigate and overcome challenges heading into a post-COVID future, the Insights on Demand virtual advisory service provides all their clients with the ability to quickly access these hard-to-reach experts in days, not weeks, or months. Clients are no longer burdened with the task of identifying and recruiting advisory board participants themselves, scheduling venues, or booking travel. “The Insights on Demand virtual advisory service offers the ultimate in flexibility, format, and cost-savings,” said Jones.
Navigating in a Post-COVID Marketplace:
It feels like just about every conversation we have these days, whether its personal or professional, eventually circles back to COIVD. But with the number of Omicron cases declining, it feels as though there might be an end to the pandemic insight. CDC Director Rochelle Walensky called it an “optimistic trend.⁷” But let’s be honest, nobody really knows for sure.
With that said, how does the biotech industry now move forward and find their new normal? “It’s about prioritizing,” said Jones. At the beginning of the pandemic, many a biotech company quickly pivoted and took decisive action to protect both their employees and their clients. Now these same biotech companies are carefully considering how best to navigate forward and “future-proof” their business in a post-COVID marketplace. That doesn’t just happen by accident. “You need to put the work in, be strategic, and plan accordingly because your priorities, along with the business landscape, have probably changed,” said Jones. “Most of our clients are starting with a new market assessment. They are looking at the changes in the various customer segments, they’re look at the competition and distribution channels, and looking to see what if any new barriers-to-entry there are here in 2022. A great deal has already changed since the close of 2021.”
This is where The Deerborne Group comes in. They work closely with their biotech clients to identify opportunities, minimize risks, and how best to navigate their most difficult management challenges moving forward in a post-COVID marketplace. To that end, their customer value proposition is very straight forward — “helping clients accelerate insights into value.”
About The Deerborne Group:
The Deerborne Group is a boutique management consulting firm that focuses exclusively on the global biotechnology, in-vitro diagnostics, and life sciences industries. Their primary focus is advising corporations, venture capital, and private equity firms on commercial, operations, and corporate strategy. They help clients identify opportunities, minimize risks, and how best to navigate some of their most difficult management challenges.
Copyright© 2022 | The Deerborne Group, Inc.
1. What is the History of the S&P 500? Investopedia, December 13, 2021, What Is the History of the S&P 500? (investopedia.com)
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U.S. Coronavirus Cases Decrease, But Many States Have Yet to Peak, January 24, 2022, https://www.usnews.com/news/best-states/articles/2022-01-24/u-s-coronavirus-cases-decrease-but-many-states-have-yet-to-peak