It's great to sit down with you and discuss some of the interplay between my world, the IPO environment and your world, the M&A market.
Yeah. Thanks, Dan. I appreciate the time. And I do think that there's a lot of interaction between our respective businesses.
When we think about the biopharma M&A backdrop at this juncture, we are bullish on the sector, and we believe that there's going to be a robust set of transactions throughout the course of the year. And that's really a function of a couple of things, namely, the fact that most pharma companies are facing some version of the same issue, which is they are looking to address a mid to late decade patent cliff in a key franchise, and they need to address that in order to inflect their top line growth, which is ultimately what drives valuation.
Now, I sense that you probably don't share that same level of optimism for the capital markets environment. Yeah. Look, I think optimism was high. After the election and entering the year. I think folks thought that as many as 15 biotech companies could go public in Q1. Thus far we've had four. So it's obviously a lot of factors that are driving that.
The macro is a large one. Underperformance of healthcare is another. But, you know, M&A is proving a little predatory, to the IPO backlog. And frankly, the highest quality private companies are very content is at, private, where they have good access to capital and don't need to deal with a stock price that's trading up or down based on the whims of the market.
I you know, I love your comment on a couple of the dynamics driving pharma to jump at private companies. Dan, it's an interesting point. You raise because in a lot of ways, the challenging IPO backdrop has actually created a maturation of private companies, whereby those companies have demonstrated real clinical proof of concept and now all of a sudden become attractive pharma targets.
And because you can structure a transaction in a much more bespoke manner when you're dealing with private companies, in a lot of ways that's allowed selling shareholders to really participate in the upside and create a win-win for themselves. Yeah. And look, meanwhile, as the IPO market has been trickier and the public market investors are more risk off.
You've had a tightening of the aperture of companies that they're willing to look at in an IPO context. Right. You need to have clinical dressed assets with proof of concept data. You need to be going after large end markets. You need, clear line of sight to upcoming milestones. And you need to approach the market with a valuation that works.
And investors are very unwilling to budge on that. And meanwhile, the highest, the highest profile private companies are willing to sit privately because they have really robust access to capital in the private market.
All of those factors make sense, Dan, and from our client's perspective, we think it's important for them to really evaluate and consider both options, because at the end of the day, they need to position the company for long term success.
I'd be curious to hear what your thoughts are for the rest of the year.
Look, the public markets have always been the most robust source of capital for biotech companies, so I do expect that many management teams and boards are going to press ahead and charge into the public markets. Too, there's been a lot of very interesting science that's been prosecuted in private biotech companies, and these companies are relatively well capitalized.
So public investors can't use their balance sheets against them as they prosecute IPOs. So obviously the macro is tricky, but I do expect that on the back half of this year, we'll have a decent slate of IPO activity, and private companies will have good outcomes ahead for them. That sounds great. Dan, I really enjoyed this discussion and it sounds like we'll both have very busy back out of the year.
I hope so.
