Bridging Biotech’s Gap Between 2024’s "Haves and Have-Nots" to Usher in a New Era of Innovation for 2025
The biotech industry’s widening divide between the haves and have nots dominated 2024 - large oversubscribed rounds at one end, while others stretched cash runways, facing potential shutdowns. As Holistic patient-centric innovations leverage cross-vertical integrated (multi-modal) solutions to advance Precision Medicine & democratize access to quality care, we cover selectively broad highlights, to look beyond single verticals of pharma, medtech/medical device, and techbio, to view interdepedencies and potential multi-modal synergies as we move toward a multimodal AI transformation.
Nature’s August 2024 publication, Biotech Financing: Darkest Before the Dawn (paywall) https://www.nature.com/articles/s41587-024-02357-2, sheds light on the challenges and opportunities shaping the funding gap. The pivotal election and shifting geopolitical, technical, and economic dynamics moving into 2025, may mark beginnings of a transformative chapter.
2024 Challenges and Emerging Trends
Venture Capital and Funding Dynamics
Growth in Venture Funds: Led to Bigger but Fewer Rounds. The average private biotech funding round (excluding seed rounds) soared to a 15-year high of ~$90M in 2024, with nearly 50 companies raising over $100M each - widening a divide between those with oversubscribed rounds and everyone else.
Trend toward Modality Matters & ‘Clinical Assets Only’: Oncology continues to dominate with areas such as ADC & RLT, bypassing the Clinical Asset Only rule. followed by bispecific/ multispecific antibodies (BsAb/MsAb), and targeted protein degraders. Other top areas of venture financing: Neuro/CNS (incl. ophthalmology), metabolic disorders, and immunology/inflammation (Dealforma)
AI & Platforms: AI Research & Drug Discovery were on track to raise more venture money in 2024 than in any previous year apart from 2021. Platform-based partnerships are the only category to beat prior years in overall value. Right Platforms combined with strong teams with track records won most. Average Upfront cash & equity sums are at a 15yr high (DealForma). Eg.)Orbis Macrocycles 28M Seed from Novo & Forbion , Molecular Glues $8B biobucks in 2024, Xaira Therapeutics $1B Series A round from Arch Ventures (largest in their history)
2024 continued a Challenging Rough Patch for Others
o Many between start-up & clinical validation seeking series B /C funding , having to accept lower valuations, particularly if they lack proof of concept data –2024 focused on streamlining, seeking interim non-dilutive funding pathways, refinancing on less favorable terms, merging, or shutting down. [always good to prioritize validating data for your portfolio in uncertain economies, over boiling the ocean (overly diversifying & following blinking lights – you know who you are)]
o Solutions seen as Scientific Marvels with manufacturing/scalability challenges. CGT saw steep down-turn in financing, while 250 trials for CAR-T cell therapies started in 2023.Most expected manufacturing and scalability challenges to be figured out by now (*yet spurred accelerated advancements in ‘figuring it out’ , eg. Cellares, Xcellbio, etc) The challenges around commercial access & scalability for scientific marvels also affected CRISPR/gene editing in 2024 (along with formerly largely funded synbio operations)
o Rare Disease Community took a blow with the lapse of the Rare Pediatric Disease priority review voucher (PRV) program, as of December 20, 2024 – a cost-effective policy incentivizing research & development for millions of children living with rare disease who rely on this program for hope in finding solutions where little to none exist.
Big Pharma’s Strategic M&A
Big Pharma $1 Trillion to spend according to Ernst & Young, continues to make them biotech’s key resource in tight public markets
M&A activity surpassing 2023 levels and exceeding pre-pandemic highs from 2019.
Phase 1 and Phase 2 assets accounted for over 60% of all acquisitions, though upfront payments hit an 8-year low (in contrast to Platform deals), reflecting mostly back-ended deals to mitigate the broader economic uncertainty.
Licensing deals totaled ~$150B in 2024, the highest value in five years, despite fewer overall deals than in past 10 years – reinforcing ‘bigger but fewer’ (DealForma).
CVC (Corporate Venture Capital) arms like Lilly Ventures and Novo Ventures played a critical role in supporting early-stage innovation ecosystem, bolstered by parent companies’ windfalls from obesity therapy breakthroughs.
Diagnostics M&A Exceptionally Low
No Deals exceeding $1B and only 20 company acquisitions, some calling it ‘Rock Bottom’
Some blame FDA regulatory uncertainties around LDT around stifled dealmaking
C-suite shifts at multinationals Illumina and Agilent, among others focus bandwidth on restructures, compounded by the AI evolution driving traditional diagnostics not often set up for ‘drop of a dime’ agility to shit their organizations beyond VCR to streaming –as dust settles on strategic transformations, likely slowed investments in external growth.
Glimmers of Dawn for 2025
Market Tailwinds:
Federal interest rate reductions, a late-year uptick in IPO activity, and SoftBank’s $100B U.S. fund suggest renewed optimism for 2025.
Cell and Gene Therapy (CGT) Optimism:
Roche’s $1.5B acquisition of Poseida Therapeutics’ allogeneic CGT platform, expected to close in early 2025, hopefully underscores growing confidence in CGT scalability.
Opportunities:
Asia: Reservoir of Innovation
Navigating Geopolitical Tensions:
While the BioSecure Act didn’t pass in 2024, geopolitical headwinds will likely persist. Pharma companies remain cautious about CRO/CDMO collaborations that risk potential unnecessary tech transfers during times of uncertainty.
Innovation Leadership:
In 2023, China outpaced the U.S. (34%) for the first time in Oncology Novel Active Substance (NAS) trial starts, accounting for 35% of trials (up from just 1% in 2008) – while South Korea doubled its oncology trial activity over the past decade. [IQVIA 2023]
Politics aside, the Pharma consensus conveys they can’t afford to not to look at innovation there, with many Search & Evaluation teams scanning Chinese/Asian assets for opportunities to improve existing mechanisms of action across oncology, immunology, neurology, and metabolism – occasionally, to discover early concepts [in the West] have been found in the clinic already.
CRO/CDMO : Tailwinds for 2025+
Biologics are expected to reach >$800B by 2028 with growing demand for efficiency, consistency and scaling innovations for burgeoning complex advanced therapies across RLTs, ADC, CGT, lentiviral, AAVs and Bispecific/Multi-specific antibodies.
EBP (Emerging Biopharma, R&D spend<$200M , revenue <$500M) increasing role in trial starts:
EBPs (companies with <$200M in R&D spend) accounted for 60% of NAS trials in 2024, up from 30% a decade ago. underscoring the growing reliance on EBPs, external innovation drives 67% of AbbVie’s pipeline.
With fewer larger rounds, VCs are funding companies for longer, & more generously – so when they do emerge, they’re closer to the line of Pharma ‘buyers’ interests to see clear evidence of clinical differentiation.
AI-powered workflows empower infrastructure limited EBP’s pipline development, by advancing ways to accelerate drug discovery timelines.
In-silico compound screening expected to reduce lead identification from months to weeks. Large molecule optimization and drug vector design, Ab, mRNA over 3x expected acceleration in timelines, overall cutting time to approval by 1–2 years (Source: IQVIA, McKinsey 6/24)
CDMO Consolidation with each other and Pharma, during growth in EBP demand:
Lonza 2024 acquisition of Roche’s Vacaville facility – world’s largest bioreactor capacity by volume, 330K Liters. Novo Holdings acquisition of Catalent. Pending acquisition of Evotec..Capacity demand to serve EBP will remain.
CDMOs to watch in 2025: Cellares [IDMO -integrated end to end CT manufacturing], Lonza, Catalent’s OneBio platform, AGC Biologics, South Korea’s Lotte Biologics & its increasing focus on CGT, Mabs, and ADC. CDMO-adjacents : PanTera, Ori Biotech, and AiCella.
Geopolitical Tension & Sector Consolidation:
As geopolitical tensions are expected with talks of tariffs, BioSecure Act – many already began seeking alternatives to mitigate potential risks in an uncertain climate.
AI Evolution Beyond Low Hanging Fruit
·“Low Hanging Fruit”: Google CEO Sundar Pichai says AI progress with get harder in 2025 because ‘the low hanging fruit is gone’
~1000 FDA approved AI/ML applications to date, 97% of them 510Ks in radiology/ imaging (image quality, help position patients, optimize radiation, etc ) with cardiovascular second - exponential growth in FDA submissions from 2015-2023, with its first decrease in 2024 as companies are expanding into other specialties.
With Techbio are business model/Team shifts : Techbio created new business models around Data Monetization and Cognition as a Service– Teams expand to include new disciplines and adapt to growth in IP management strategies from patents to copyright & trade secrets, licensing valuations and structures.
Big Tech’s moves into Life Science
Nvidia significantly outpaces other Big Tech, with 562 health-related partnerships* in 2024, outpacing Google (220) and Amazon (~175). [CB Insights, 5/24 *health-related partnerships: health data & analytics, digital therapeutics and wellness tech, Monitoring/Imaging/Diagnostic Tech]
2024 deals to watch in 2025 : Quest/PathAI, Tempus/Ambry, and Xaira Therapeutics’ $1B Series A—the largest in Arch Venture’s history.
2025 Developments to Watch
Growing Multi-Modal Wave: Holistic > Siloed R&D.
Bringing together different pieces of data, from imaging, laboratory results, and other patient RWD (eg. monitoring tech – video, wearables, etc.) and combining therapeutic modalities that optimize outcomes and workflows.
o Multi-modal Treatments: eg.) RLT & ICI, Radiation Treatment Planning, Gene Therapy Robotic Surgery, CGT, etc.
o Multi-modal Discovery, Diagnostics & Analytics (CDx, Lead & Biomarker & Endpoint Identification): Companion diagnostics’ integration of Molecular and Protein Data (single cell sequencing, multiplex IHC, spatial biology). and multimodal clinical Interpretations of sequencing information.
§ Decentralized natural history studies to identify endpoints for rare monogenic diseases remains an on-going unmet need where a start-ups’ initial proof of concept could serve as gateway to larger populations. Eg) pediatric digital monitoring & AI.
§ AI & MIM Software: integration of images from multiple modalities into treatment plans with advanced processing to support therapy response determinations
Innovation & Regulatory catch-up:
o Functioning regulatory approach for clinical GenAI applications, that provide adaptations in regulatory science by policy makers & researchers to assure safety/efficacy of LLMs in clinical use and timely adoption of patient benefits. Blumenthal proposes treating GAI based clinical applications less like devices and more like clinicians/clinical intelligence [Blumenthal NEJM AI 7/12//24 - https://ai.nejm.org/doi/pdf/10.1056/AIpc2400545]
Theranostics/Radioligand Therapies :
§ FIND Act: allowing access to diagnostic agents essential for identifying eligible patients for RLT, which if adopted would help ensure diagnostics remain accessible for community hospitals with tighter budgets - providing for more diverse data pool for technology advancements.
§ Regulation evolution around patient management, radiation safety and waste management. While data around (alpha emitting) toxicity, immune system interaction, and optimal position in treatment workflow still a work in progress.
Range of regulations exist geographically. In Japan, RLT requires multi-stay while just hours in some clinics.
Current regulations on how much radiation to give patients are based on external beam radiation – this is the wrong baseline (Cavey, ITM). Meanwhile, data in development to determine what the right basline, for an evolving field.
Fight for Renewal of Rare Pediatric Disease PRV in 2025, by Rare Disease Community stakeholders.
Final Thoughts: A Promising 2025
Despite remaining economic headwinds, consensus favors biotech poised for a rebound in 2025. Strategic focus, collaboration, and innovation will be essential as the industry capitalizes on technological advancements, regional opportunities, and Big Pharma’s ongoing appetite for transformative assets. The future looks promising for those ready to manage stakeholder risks and adapt to landscape changes.
