Venture capital in the sector hit $9.2 billion in the second quarter of 2024, up from $7.4 billion in Q1, while exits fell on a slower M&A cycle and picky IPO market.
Venture capital funding in biopharma is on the rise, reaching $9.2 billion across 215 deals in the second quarter of this year, the highest level since the same period in 2022, according to PitchBook’s Q2 2024 Biopharma Report released on Friday.
Both the value and number of deals in Q2 were up significantly compared to Q1, which by comparison generated $7.4 billion across 196 deals.
PitchBook credited emerging technologies like advances in CRISPR and oncolytic virus therapies, as well as obesity treatments and AI-driven platforms, for attracting the Q2 investments. Formation Bio’s $367 million series D in June brought its total funding to over $618 million. In April, Xaira secured one of the largest early-stage rounds in biopharma history with its $1 billion Series A round. Both companies utilize an AI-driven drug discovery platform.
Trends have pointed to an asset-centric focus, favoring advanced clinical programs over platform investments. While investors recognize AI’s potential in pharma, investments in the technology are considered long-term with slow adaptation for clinical development.
“The slow adoption of AI in clinical development highlights the need for a long-term investment vision, as seen with leading AI therapeutic players such as Exscientia and InSilico Medicine still in clinical studies despite being founded years ago,” the report said.
The top two therapeutic areas in Q2 were oncology, followed by immunology and infectious disease. Oncology therapeutics scored 96 deals and over $3.3 billion, while immunology and infectious disease saw 68 deals worth $2.8 billion.
However, the report noted a contrasting trend in Q2 for exits with a significant decline compared to Q1—$4.5 billion across 15 deals compared to $10 billion across 24 deals. The M&A cycle has slowed after some large deals seen in previous quarters, which PitchBook attributed to depleted cash reserves, full pipelines and a trend seen in advancing startups rather than selling them.
IPO activity has reflected a preference for companies with mature clinical data, according to the report. Notable activity in Q2 included Alumis going public at $210 million and Rapport Therapeutics at $172 million. Alumis’ listing on the Nasdaq in June followed closely on the heels of its $259 million Series C in March. The company released Phase II data just after its Series C, positioning its second-generation TYK2 inhibitor for plaque psoriasis as a contender against BMS’ Sotyktu.
The IPO landscape remains mixed with high-quality companies going public in decreased numbers, PitchBook noted. Successful exits have been split between IPOs and M&A so far this year, according to the report.
Pitchbook said an area of potential concern is congressional passage of the BIOSECURE Act. The bipartisan bill, which could be voted on in the House of Representatives by the end the year, is expected to disrupt biopharma as the government stops companies from using equipment or services from “biotechnology companies of concern.”
If it becomes law, U.S. companies would be restricted from doing business with certain Chinese biotech firms, including WuXi Biologics. While this legislation is expected to have a positive long-term impact for CDMOs outside of China, as companies transition by 2032, the biopharma industry will be hurt in the short term, potentially disrupting current investment trends.
Still, the report finds the overall state of the biopharma sector is positive. For the remainder of 2024, PitchBook’s analysts project stable deal activity, pointing out that the lowering of interest rates could improve funding conditions.
