It’s time for one last look at the biotech numbers for 2024. And you might be surprised by some bullish charts below — especially if you zero in on deal numbers and VC cash.
But not all pistons are firing, leaving the engine underpowered on key measures as the industry settles into an intriguing 2025, where there’s lots of potential, uncertainty about President-elect Donald Trump’s return just days from now, and plenty of pent-up frustrations.
Traditionally, this week’s JP Morgan Healthcare Conference has served as the starting gun to launch talks that can turn into deals before Christmas. But the mood going into the conference this year was still muted, with Biogen’s bargain basement offer for Sage — less than cash — highlighting the grim reality facing biotechs that fail to live up to the high expectations they gleefully pushed.
The dark clouds parted on Monday, though, with $18 billion in acquisitions that included
J&J’s $14.6 billion takeover
of a promising neuro play. That deal alone dwarfed the biggest deal of 2024, and left a sense that we could be on the cusp of a much busier M&A year.
From my background conversations in the last few weeks, I’d say the industry is more upbeat than I’ve seen in the last couple of years, but grounded by the slow pace of high-dollar dealmaking. Based on the numbers below, once again provided by Chris Dokomajilar at DealForma, venture players clearly have the cash to back breakthrough science. And they can wait and see if the prospect of lower interest rates (Dear Fed: yes or no?) might reignite some of that old love generalists once felt for drug development and medical innovations.
From what I’m seeing, quite a few people are waiting to see what a new Trump administration and key figures arriving in Washington might do to the FDA, where top administrators
are bowing out
before Trump is sworn back into office.
Marty Makary’s nomination
as the new commish has calmed fears in biotech, but regulatory lines appear to be shifting. And that raises the need to review pipelines and development plans.
The question, as always, was whether the bureaucracy would slowly strangle change, or give way to Trump-style reforms that some of the activists relish.
If you don’t look too closely at the deal numbers, you might think we’re back in a boom. But of course, that isn’t so. Contract services ended the year well up, driving a spike in total deal numbers — 3,471 in 2024 from 2,326 in ’23 — that pushed the bar into boom territory.
If you look a little closer, though, you’ll also see the upfront cash and equity on the table plunged from $245 billion in 2023 to $173 billion last year. So lots of deals, but not the kind of hard dollar figures that juice expectations. Total deal value also took a hit, dropping to $388 billion from $452 billion.
Biotech went into Q4 last fall looking a little peaked on the licensing front for therapeutics and platforms, Phase 3 and earlier. But it came out of the last quarter in fighting trim, part of the stop/start nature of the industry recovery that leaves us hopeful of better times ahead, even if it’s improving overall at a lackluster pace.
Add it all up on licensing deals for therapeutics and platforms for the year, deal flow was flat compared with 2023 — 434 deals last year compared to 435 in 2023.
But the dollars were better. Upfront cash and equity, the proof in the dealmaking pudding, ticked up from $12 billion to $13 billion. Deal value — the dream-inspiring fodder that fuels the oversized ambitions that give biotech much of its pizzazz — jumped from $174 billion to $183 billion. That extra $9 billion of upside will help keep many a biotech team focused on the future.
Kyle LaHucik’s
recent tally on megarounds
in 2024 — with 96 star teams attracting boom-time backing — led me to believe that the year’s venture performance across the board would look good. It proved better than good.
With the sole exception of seed financing — which often remains hidden in the background as venture groups test to see if their biotech gambles appear to have legs — every category of venture investing surged in 2024.
Series A and B rounds dominated the scene, as VC groups aggressively backed their startups with $27 billion of recorded deals. That’s well above the $23.2 billion registered in ’23. And it almost outpaced the $28 billion registered in ’22. Last year’s healthy investing levels left a clear marker for the industry that the key private rounds that fuel innovation in biotech are finding plenty of institutional support for their new funds. But how long will that continue without a run of M&A and successful IPOs?
Whatever was driving venture funding in 2024, it had nothing to do with ’24’s IPO market for biotechs. The Everest-like peaks that soared up in the Covid boom are receding into the rearview mirror, and there are no expectations that we’ll get back to the everything-flies crest until the next boom comes along years ahead.
And then, of course, we know what comes after that.
For now, the IPO market is likely to be tested again in early 2025, after gaining a bit of traction last year. The $3.8 billion from 19 IPOs may not inspire big public dreams in biotech, but it was a significant improvement over the 13 offerings and $2.7 billion posted in a bleak 2023.
PIPEs and follow-ons surged early in 2024, which bolstered the year-end numbers and made last year a significant improvement over 2023.
That source of PIPE capital — private money for public biotechs — proved crucial for the post-boom era and leaves a number of analysts looking to see how 2025 will start. Over four quarters, $14.6 billion flowed through PIPEs, but almost half of that landed in Q1, attracting a lot of attention. All of ’23 saw $7.4 billion in PIPEs.
A big Q1 also drove the year’s performance for follow-ons in 2024.
In the days after the election, analysts were too surprised to see the biotech stock indexes suffer compared to, say, the S&P 500. Investors were fretting about a smaller FDA that was unable to field enough staffers to help facilitate drug developers. What would Robert F. Kennedy, Jr. do to vaccine developers? (During a conversation last week, I only half-jokingly suggested that cancer vaccines might need a new name.) And how would the IRA bend the development business in the year ahead?
Biopharma prefers a hard reality everyone understands over uncertainty, which roils the market. Right now, uncertainty prevails.
It was an article of faith among biotech investors a year ago that big pharma needed to buy up biotech assets to keep their pipelines looking full. But the big pharma crowd must not have received the memo.
Not only was deal volume down —to 122 from 138 — but M&A dollar numbers crumbled to about half of 2023’s $160 billion. And the fourth quarter was particularly bleak.
That may have tempered expectations for 2025, but I found it interesting to hear several biotech execs confidently predicting that Bristol Myers Squibb has to do something notable this year. They’re not alone. So maybe we’re seeing the same theme fine-tuned to a more case-by-case analysis.
JPM Monday helped set the tone for a bigger year ahead, with J&J stepping up while other players signaled a more aggressive era under Trump.
Still, among a lengthy lineup of interviews ahead of JPM, there was a general consensus that M&A would be up this year — even a few wondering if lower rates and a more forgiving FTC under a new Trump administration might trigger something really big among the buyout contenders. But the trendy place in M&A right now is still under the $5 billion mark. Generally
well
under.