In 2022, the number of life sciences IPOs priced in the U.S. was the lowest in over a decade. Even many of those companies that floated in sunnier times still have near-term capital needs in what continues to be a challenging public market environment. Among the life sciences companies that went public in the decade from 2010–19, over half ended 2021 with less than two years of cash in hand, and most were unable to finance in the 2022 down market.
As a threatened recession further complicates capital markets, small and midsize life sciences companies should think proactively about alternative sources of capital and how to be in the best position to attract these sources of capital. With sector-wide valuation challenges, more companies than ever need to raise capital. In 2023, we expect to see a new era of streamlined and flexible operations, renewed focus on key assets, and a strong focus on alternative financing solutions.
With tighter access to capital, we expect to see small and midsize life sciences companies reevaluate their development programs and place a greater emphasis on development and investment. Many strategic partnering and licensing deals, and even acquisitions, are likely to occur as companies seek to achieve a more compelling pipeline portfolio. Small and midsize life sciences companies should also expect greater scrutiny from investors on how capital is allocated, with a focus on pipeline optimization and value creation. We therefore expect to continue to see companies exploring innovative transaction structures. In one recent example, the acquirer obtained certain marketed drugs and clinical assets, with the remaining drugs that were in development spun off into a new entity that retained the pipeline products.
We also expect the landscape of alternative financing solutions to continue to evolve in 2023, including through a growth in royalty financing and increased private equity and debt financing. Historically, royalty financings were reserved for late-stage and commercial assets, but they have now become an option for development-stage assets. Royalty financing provided more than $10 billion in funding to the sector between 2017 and 2021. Investment could expand as royalty financing continues to extend to earlier-stage assets, particularly for companies that have experienced difficulties in accessing the public markets.
In recent years, many of these investors have added capabilities to enable clinical trial financing and have made venture-style investments in life sciences companies. This has blurred the lines between private equity and venture capital in a similar fashion to developments in the technology space. We expect to see private equity investors continue to expand their participation in life sciences companies, with novel financing and buyout opportunities increasing.
Market challenges have also led to an uptick in development-stage life sciences companies accessing debt financing. Many debt deals have been conducted as part of broader financing packages. Companies would be well advised to ensure they understand the long-term implications of any package, including how maturity relates to development and commercial milestones and the ability to service debt.
With market pressures expected to continue, life sciences companies will need to continue to explore alternative sources of capital. As companies head into 2023, the following will be important: