Biopharma investment trends continue to shift, with venture funding jumping to $7.4 billion across 188 deals for the first quarter of the year. This compares to $6.3 billion across 248 deals the previous quarter and demonstrates an increase in deal value despite declining deal count, according to PitchBook.
Despite investment trends changing, funding levels quarter over quarter have stayed relatively stable over the past two years, defining a new normal for the sector until federal interest rates change, according to PitchBook’s quarterly biopharma report. The cautiously optimistic climate remains focused on advanced clinical assets, with platform bets mostly out of the picture.
Sector exits, including IPOs and M&A, totaled $6.9 billion across 23 deals in the first quarter, compared with $5.4 billion across 26 deals in 2023’s final quarter. The IPO string that followed the J.P. Morgan Healthcare Conference in January, such as CG Oncology’s $380 million debut or Kyverna Therapeutics’ $319 million offering, has been trailed by a slump at the end of the quarter.
A dearth of quality companies may be contributing to the decline in IPO momentum rather than of a lack of funding to enter the public markets.
“The outlook for 2024 is accepting a new normal, with companies adopting an asset-focused strategy to navigate the current high interest rate environment,” the PitchBook analysis found.
Over the previous year, many companies doing midstage testing were funded. Those companies still need time to progress their clinical data, giving possibility to another IPO window opening before the end of 2024.
Radiopharma and antibody-drug conjugate M&A has slowed as well, with pharma’s pipelines restocked for the time being.
Meanwhile, obesity drug development remains a hot area, with Novo Nordisk’s $1.1 billion buyout of Cardior Pharma, Fractyl Health’s $110 million IPO and Metsera’s $350 million fundraise all occurring this quarter. However, more approaches outside of the GLP-1 paradigm are needed, with lead companies in the space going after similar mechanisms.
Interest in early-stage firms integrating artificial intelligence has also slowed due to the realization of long timelines. A long-term investment vision is needed, as seen with Xaira’s eye-popping $1 billion round. The impact of newly launched generative AI bets may not be apparent until 2030.
Another area in which investment has slowed is the cell and gene therapy space as leading biotechs’ assets require more time to advance.