Venture capital funding into biopharma rose to $9.2 billion across 215 deals in the second quarter of this year, reaching the highest funding level since the same quarter in 2022.
This compares to the $7.4 billion reported across 196 deals last quarter, according to PitchBook’s Q2 2024 biopharma report.
The funding boost may be explained by the industry adapting to prevailing federal interest rates and rejuvenated confidence in the sector, according to the financial data firm. However, part of the high figure is driven by mega-rounds in AI and obesity—such as Xaira’s $1 billion fundraise or the $290 million that Metsera launched with—where big VCs keep scoring and smaller firms are less successful.
While VC investment was up, exits were down, declining from $10 billion across 24 companies in the first quarter of 2024 to $4.5 billion across 15 companies in the second.
There’s been a balanced split between IPOs and M&A for the year so far. Overall, the M&A cycle has slowed down, according to Pitchbook. The data firm cited depleted cash, full pipelines or a move toward advancing startups versus selling them as possible reasons for the change.
Meanwhile, it’s a “mixed picture” when looking at IPOs, with high-quality companies still debuting on the public markets, just in decreased numbers, according to PitchBook. The analysts namechecked eye and lupus-focused Alumis' $210 million IPO, Third Rock company Rapport Therapeutics' $172 million IPO and Johnson & Johnson-partnered Contineum Therapeutics' $110 million debut as “reflecting a continued preference for companies with mature clinical data.”
As for the rest of the year, stable deal activity is expected, with several factors at play. Potential lower interest rates could improve the financing environment, while the BIOSECURE Act may disrupt conditions. The bill is designed to limit U.S. business with certain Chinese biotechs by 2032 to protect national security and reduce reliance on China.
In the short term, the legislation will hurt U.S. biopharma, but will foster connections with CROs and CDMOs closer to home in the long term, according to PitchBook. Additionally, upcoming U.S. elections and new administrations mean directions could change.
So, what’s the big takeaway? While overall venture funding is rising, obstacles such as slow M&A activity and unfavorable public valuations make it hard to find suitable exit opportunities.