Private equity, venture capital flows to biotechnology lowest since 2019

In 2024, global private equity and venture capital transaction value and volume in biotechnology declined to their lowest levels since 2019, according to S&P Global Market Intelligence data.

Compared to 2023, transaction value declined by 11% to $20.28 billion, and the number of deals dropped to 777 from 894.

Rising interest rates affecting investment valuations, increasing product development costs and a complex regulatory environment have contributed to the decline, Dan Shoenholz, US healthcare and life sciences PE leader at EY-Parthenon, told Market Intelligence.

However, the sector showed some positive data in 2024, with private equity-backed biotechnology transaction values increasing each quarter throughout the year.

The US and Canada had 281 deals in 2024, the highest among all regions, followed by the Asia-Pacific region with 264 deals.

The aggregate transaction value of private equity in biotech companies in the US and Canada reached $13.33 billion, followed by Europe at $4.41 billion and Asia-Pacific at $2.45 billion.

– Download a spreadsheet with data in the story.  – Read about private debt's share of buyout financing. – Explore more private equity coverage.

Largest biotech deals in 2024

All top 10 private equity-backed biotechnology deals in 2024 involved companies based in the US and Canada.

Obesity treatment therapies provider Kailera Therapeutics Inc.'s $400 million round of funding, led by Bain Capital Life Sciences Investors LLC, Lyra Capital LLC, Atlas Venture LP and RTW Investments LP, was the largest deal in 2024.

The second-largest deal was Arsenal Biosciences Inc.'s $325.4 million series C round of funding, which included participation from Arch Venture Partners LP, Mwg Management Ltd., Regeneron Ventures, NVentures LLC, Luma Group Advisor LLC, funds and accounts advised by T. Rowe Price Associates Inc., and Rock Springs Capital Management LP. Existing investors Parker Institute for Cancer Immunotherapy, SoftBank Vision Fund II-2 LP, Bristol-Myers Squibb Co., Westlake Village BioPartners, Kleiner Perkins Caufield & Byers, Byers Capital Management LLC and Hitachi Ventures GmbH also participated.

Within healthcare, biotechnology was the second-most invested industry, while pharmaceuticals had the highest deal value total of $28.15 billion. However, biotechnology stood out with the highest number of deals.

Outlook

A shrinking pool of public biopharma companies is increasing demand for strong privately held biotech companies, said Peter Kolchinsky, founder and managing partner of RA Capital Management LP, a life sciences-focused private equity firm that participated in fifty private financings in the biotech industry in 2024.

"The most promising science and the best companies are still attracting funding at competitive valuations," Kolchinsky said.

Carter Neild, managing partner at OrbiMed Advisors LLC, said "lower interest rates and a pro-innovation FDA" are expected to support investment in the sector.

Lower rates can provide a cheaper cost of capital for expensive R&D funding and tend to make riskier assets, like biotech startups, more attractive.

Artificial intelligence is another factor. AI could significantly impact the biotech sector, and companies are exploring its uses. Last month, the FDA released draft guidance on AI in drug development, informed by over 500 AI-related submissions since 2016, highlighting AI's expanding role in drug development.

Private equity investors may view AI as an opportunity to accelerate drug discovery and the lengthy approval processes, potentially leading to faster market entry and profits, said John Newton, private equity partner at Ropes & Gray LLP. However, AI's practical application is still developing, with regulators working to ensure its effective use while maintaining drug safety and efficacy, he added.