As the old saying goes, forewarned is forearmed. Savvy life science business leaders must always be on the lookout for the next trend in investor behavior. We will summarize some of the trends in life sciences and biotech making an impact in 2022.

Exit Ahead

Everyone is grateful for the incredible advances that have been realized in the past few years. Investors, however, are nearing the end of the backing cycle. Exits are getting more difficult. CB Insights tracked an average of 72 exits—mergers, acquisitions, and IPOs combined—per quarter in the biotech industry since Q2 of 2020, with a peak of 85 in Q2 2021.

IPOs tracked at an average of 24 per quarter over the same period. Q1 of 2022 saw 10 IPOs and 64 total exits. While M&A activity has not dropped off to the same extent as IPO activity, we expect that exits will become increasingly difficult.


Financial Leadership Crunch

Last year, the CFO role was the hot seat in biotech. That has slowed considerably during the first quarter of 2022. It has become especially difficult to attract CFO candidates with IPO experience. Many of the most desirable candidates are either still engaged and trying to deliver on investor expectations, while others had a successful exit recently and have subsequently retired. A shallow talent pool for IPO-experienced CFOs increases the difficulty of navigating to an exit this year.

Diversity Challenges

Clearly, we all agree that the increased appreciation of and search for diversity in executive ranks in biotech is good. It is as necessary as it is overdue. Unfortunately, as we’ve mentioned before, a successful DEI strategy must include options for retention and advancement as well as recruitment. Diversity at the top is a differentiator and a competitive advantage in a crowded marketplace, but it cannot be limited to only finding a diverse executive without building a clear path to the executive role for the diverse employees already employed at your company.

The ideal to increase diversity in the executive ranks of your organization is likely from within, particularly because it typically already exists in most organizations. Most organizations are gender balanced at entry level, and most CEOs are proud to have high percentages of diversity in non-executive level roles. Incorporating leadership and development programs for diverse employees can increase individuals’ willingness to join, and once hired, their sense of belonging within the organization. To borrow a metaphor from baseball, hiring the star free agent isn’t always possible, but building a strong farm team is.

Both NASDAQ and the State of California have enacted diversity mandates for company boards. This has led to more companies seeking out and leveraging talent advisory and search firms to fill board seats. Many of those firms, however, have struggled to deliver on the promise of finding talented and boardroom-ready candidates who also meet diversity goals. When looking for a partner, be sure that the firm has a strong network of diverse candidates and deep experience placing them both in executive roles to the boardroom level. Ideally the firm should have such networks reflecting gender, age, racial, and ethnic diversity.

The Future is Still Bright

While these and other challenges exist in life sciences and biotech, the future is still bright for the industry. We expect that the field will continue to grow, even if the pace slows over time. The increased demand for diverse, experienced, leadership-tested and -ready talent is a benefit for in-demand candidates. Although it may appear that it is a difficult challenge for companies looking for that talent, we believe that is a challenge that can be met, particularly when you engage experienced talent advisory firms such as ZRG Partners.

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