​​After a difficult quarter for biotech, female entrepreneur Nicole Junkermann explains what to look for in a biotech investment

Nicole Junkermann is an international investor and entrepreneur who has founded and sold her own businesses, raised a private equity fund and, most recently, made waves in the venture capital world through her VC firm, NJF Capital. She is invested in more than 45 businesses, with a particular interest in sectors like FinTech, BioTech, Software as a Service (SaaS) and AgriTech, and 12 of the businesses she has invested in are considered unicorns – companies with a valuation of more than $1 billion.

What happened to biotech investments in 2022

After a massive boom in venture capital investments in biotech, and a series of IPOs and acquisitions that promised much but eventually delivered relatively little, 2022 saw a major market readjustment in the valuation of companies in the sector, both public and private. The Nasdaq biotechnology index has fallen 28 percent since reaching an all-time peak in early September 2021, and the S&P XBI, an index of smaller companies, has fallen by 41 percent since its own peak that November.

In all, then, it looks like a difficult time for biotech and investors in it. However, several companies have bucked this trend and it looks like a (cautious) recovery is on the way: one that will benefit only companies that fit the right profile for investors. Some $5.2 billion was raised in follow-on funds by biotech companies in the third quarter of 2022, more than the first and second quarters combined, according to the FT. 

So what are investors looking for, and who is set to benefit from the improving climate?

The first must-have is new, promising clinical data, says Nicole Junkermann, the international investor and founder of NJF Capital, who has invested in nine biotech companies including multi-asset longevity biotech Cambrian Biopharma. “It’s essential to look beyond the hype around certain companies and dig into the data coming out of clinical trials,” Junkermann explains. “Companies that promise the world but can’t deliver the technology they claim to be developing are ten a penny in the sector. Look for good results from human trials to make sure that development is on the right track.” 

A second major factor to consider is the likelihood of regulatory approval, says Nicole. “Even the best idea and the most promising non-human trials can be derailed if it’s impossible to prove that something is safe.” Ironically, this can sometimes lead to a catch-22: if you can’t prove something is safe, you can’t carry out long-term human trials. And if you can’t carry out human trials, then it’s very difficult to prove definitively that something is safe. This, says Nicole, is essential to keep in mind when choosing where (and indeed whether) to invest in biotech.