Biotech is staging a rebound in 2024, with both private funding and IPO filings up meaningfully year-over-year through the first quarter.
Already in 2024, biotechs in the U.S. and Europe have raised $6.8 billion in venture funding, $1 billion more than the most active quarter in 2023. Seven firms have completed IPOs.
Of the first quarter raises, 26 biotechs closed on private rounds worth more than $100 million.
Brian Matesic, a principal at Norwest Venture Partners, attributes the increase in investment to the sector’s return to dealmaking.
“M&A started this,” Matesic said.
Indeed, notable deals at the end of last year included AbbVie’s $10.1 billion acquisition of ImmunoGen and its $8.7 billion acquisition of Cerevel Therapeutics; Roche’s $7.1 billion purchase of Telavant; and Bristol Myers Squibb’s $14 billion purchase of Karuna Technologies.
Jakob Dupont, an executive partner at Sofinnova Investments, agrees with Matesic: “We’ve been bolstered by all the mergers and acquisitions activity with Big Pharma investing more in the sector.”
With many large firms facing significant patent cliffs in coming years, pressure has mounted to rebuild pipelines through M&A — searching for the next blockbuster asset.
Similarly, new technologies, de-risked clinical trial data, and a clearer path to FDA approval also helped on the IPO front, says Matesic.
Analysts at HSBC believe 2023’s tepid fundraising environment even helped to set the stage for the current resurgence. The firm’s 2024 Venture Healthcare report notes that lackluster financing activity may have perversely driven a jump in innovation.
"In 2023, technology and business-model disruption led to an ideal environment for real innovation, and we noted that sector-leading companies had significant funding rounds, which we think will continue in 2024,” said Lead Author and Managing Director Jonathan Norris.
Norris also writes that investors are more interested in later-stage deals than new startups.
“The trend of large first-financing deals will continue, likely marked by the re-emergence of “hub and spoke” deals designed to control cost and generate unique M&A opportunities. However, first-financing deals are anticipated to continue trailing overall investment, as investors maintain a restrained deal pace and expand interest towards later-stage deals at reduced valuations.”
And, while conditions change, market participants have remained largely static versus years prior. In the first quarter, the most active investors were OrbiMed, Arch Venture Partners, GV, RA Capital Management, and Cormorant Asset Management, according to data from William Blair.