Key Insights into the 2024 Biotech Funding Market
Explore key insights into the 2024 biotech funding market, including venture capital activity, innovation spotlights, and predictions for the Q4 investing season:
In the last few years alone, the biotech funding market has witnessed significant changes from the dynamic nature of the biotech industry and broader economic trends following the COVID-19 pandemic. Just in 2023, the global biotech industry was already valued at an impressive US$1.55 trillion with a projected compound annual growth rate (CAGR) of 13.96% between 2024 and 2030 [1 ]. As we close out Q3 of 2024, the funding market is expected to maintain a strong trajectory in earnings and innovative opportunities for investors.
To mark the start of the final quarter of 2024, Partnology is diving deeper into the state of today’s funding market. This article will highlight key insights from the latest market reports, including key biopharma statistics as of Q2 end, recent innovation spotlights, and predictions for the Q4 investing season [2,3]. Continue reading for highlights from this year’s biotech funding landscape to date!
The State of Today’s Biotech Funding Landscape
According to the latest market update reports from PitchBook and Stifel Financial Corp. , the biotech funding landscape in 2024 has been shifting towards asset-centric approaches where investors favor advanced clinical assets over broader platform investments [2,3]. Not surprisingly, there is still strong enthusiasm for artificial intelligence (AI) applications in drug discovery. But investors are hesitating to contribute long-term funding support, as seen with major AI therapeutic companies like Exscientia and Insilico Medicine , which are still in clinical studies despite being founded years ago [2].
The top three therapeutic areas with the greatest venture funding activity include oncology (US$3.35 billion), immunology/infectious disease (US$2.82 billion), and cardiovascular/metabolic disease (US$1.67 billion) [2]. As for the obesity treatment market, companies are moving forward with a global strategy to source drug assets from Asia to expand innovations in this therapeutic area beyond glucagon-like peptide 1 (GLP-1) agonists [2]. Interestingly, investors are increasingly encouraging biotech startups to accumulate a larger body of mature or later phase clinical data before trying to sell or establish themselves after their Initial Public Offering (IPO) [2,3]. We’ll dive into the numbers below, but the biotech funding landscape this year so far seems to display cautious optimism and a preference for proven assets to create long-term value.
Venture Capital Funding Activity Highlights
Total Biopharma Venture Capital Funding Activity
Quarterly records show biotech venture funding has remained consistently low since Q2 2022 relative to 2021 numbers [2]. However, things may be looking up considering the total value of biopharma venture capital deals in Q2 2024 (US$9.2 billion) was the highest it’s been since the start of 2022. Up from US$7.4 billion in Q1, this means biotech market funding in 2024 has reached US$16.6 billion so far across 411 deals. These numbers suggest the biotech market may be adapting to prevailing federal interest rates, promoting renewed sector confidence for investors. At the same time, this surge could also be explained by recent mega-rounds for AI and obesity treatments for companies like HerculesAI , Xiara , and Metsara . In this second case, the skew may be driven by smaller venture capital firms continuing to lose out on deals to larger groups [2].
Biopharma Venture Capital Exit Activity
On the other hand, exit activity showed the opposite trend this year, with total exit value decreasing to US$4.5 billion across 15 deals in Q2, down from US$10.0 billion across 24 deals in Q1 [2,3]. This trend holds up even if we go further back; biopharma venture capital exit activity peaked at US$86.6 billion in 2021 before declining sharply down to US$20.2 billion in 2023 [2].
According to the market update by Stifel, the average value of a company with a great Phase 3 dataset today is 42 times higher than a company with no data [3]. Three notable IPOs took place this year from Alumis , Rapport Therapeutics , and Contineum Therapeutics exemplifying this, with their offerings ranging from US$110.0 to US$210.0 million [2]. Otherwise, the US IPO market in Q2 was noticeably quiet since that of Artiva , which priced a US$167 million offering back on July 18.
Similarly, merger and acquisition activity has slowed somewhat, possibly due to limited cash reserves, loaded pipelines, or a preference for advancing startups rather than selling them [2]. Despite these, 2024 has seen two notable exits, including ProfoundBio’s $1.8 billion acquisition by Genmab , as well as Escient Pharmaceuticals’ $750.0 million exit to Incyte [2].
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2024 Innovation Spotlight: CRISPR Therapy Drug Delivery
Coming out as a standout area of innovation and investment in the 2024 biotech funding market is CRISPR (clustered regularly interspaced short palindromic repeats) therapy drug delivery [2]. As a quick refresher, CRISPR therapy is a biotechnology tool for treating genetic diseases by directing Cas9 enzymes to specific DNA sequences for corrective gene editing [4 ]. However, its primary challenge has been finding an effective method of drug delivery. Emerging delivery routes like viral vectors, lipid nanoparticles, and cell-penetrating peptides are attracting substantial investments, as well as promoting stronger partnerships between biotech companies and pharmaceutical firms [2].
As of this year, several notable industry players are leading the way in funding for this area of research [2]:
However, these CRISPR-focused companies do continue to face some challenges, including improving delivery efficiency, reducing off-target effects, and managing immune responses [2]. With this surge in funding, the industry is seeing more opportunities for future advancements in CRISPR. For example, Spotlight Therapeutics is creating preassembled ribonucleoproteins for highly specific delivery, while Incisive Genetics is developing a proprietary lipid nanoparticle platform. Other areas to explore further include developing more targeted methods, expanding applications to complex diseases, and advancing in vivo delivery for direct treatment [2].
Biotech Funding in Q4 2024: What Should We Expect?
As we enter the final quarter of investing for 2024, the biotech funding market will be shaped by several economic, scientific, and political factors. For one, as inflation begins to recede around the world, the resulting monetary easing is expected to create a stronger environment for biotech investments [2,3]. This means even more capital available not only for larger established companies, but also for smaller biotech startups [2].
Scientifically, market reports are citing a growing sense of optimism among investors as more novel innovations focus on creating significant value for patients and shareholders. For example, Kymera’s STAT6 program has the potential to redefine the capabilities of protein degraders when targeting immune-mediated diseases [2]. Funding across the obesity market is also expected to attract more interest from investors who are looking for small molecule alternatives beyond GLP-1 agonists [2]. Pending readouts from ongoing clinical trials of these and other promising therapies could influence market movement by helping guide investors towards the most promising biotech funding allocations [2,3].
Politically, the upcoming US presidential election could present important implications for healthcare policies and drug pricing regulations in some markets [2,3]. Depending on the outcome, it’s possible these factors may drive investors to take on a more defensive or conservative approach with biotech funding when allocating assets. Another crucial political development to consider is the newest BIOSECURE Act passed on September 9 by the US House of Representatives [5 ]. The Act mandates that US companies transition fully by 2032 to alternative service providers to limit reliance on biotechnology firms from geopolitically hostile foreign nations. This will definitely present a short-term slowdown for the US biopharma industry, but long-term, it encourages companies and investors to partner with local contract research organizations (CROs) or contract development & manufacturing organizations (CDMOs) [2].
Conclusion
As we’re seeing from market update reports, the biotech funding landscape in 2024 so far is colored by a mix of caution and optimism. Several economic, scientific, and political factors will determine which way the state of the market will lean by year-end. With the final quarter of 2024 underway, venture capital and pharmaceutical firms are keeping a close eye on industry trends to inform their investing strategies and reap optimal success in this year’s biotech funding market.
Interested in learning how you can leverage Partnology’s 20+ years of combined expertise with startup consulting to navigate the dynamic biotech industry? Talk to a Partnology representative today or explore our website here !
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Dennis White