Welcome to Part 2 of our 2026 Life Sciences Industry Outlook series. Today, we are focusing on life sciences capital markets activity in 2025 and expectations for 2026.
The life sciences equity capital markets in 2025 were defined by a stark “tale of two halves,” beginning with intense volatility that effectively shuttered deal activity. The first half of the year was marred by significant market uncertainty, particularly following the “Liberation Day” tariff announcements. This event, combined with regulatory upheaval caused major indices like the XBI and Nasdaq to slide. During this period, the capital markets lay dormant—April saw zero priced biotech IPOs and only four priced follow-on deals, three of which were registered directs.
However, the second half of 2025 witnessed a powerful rebound as markets stabilized around greater regulatory certainty and interest rate cuts supported increased investment in the sector. Data provided by Jefferies indicate that activity accelerated significantly from June through December, with 112 follow-on offerings completed in the second half compared to just 45 in the first half. The IPO market also slowly began to emerge; after a dormant second quarter, three biotech IPOs priced across the second half of the year (resulting, however, in just seven IPOs total in 2025).
The recovery in the follow-on equity market was characterized by a shift in execution strategy and strong aftermarket performance. As investor optimism reached yearly highs, companies increasingly utilized public marketing for follow-on offerings rather than relying on confidential, wall-crossed structures. Between June and December, approximately 67% of follow-ons featured a public marketing component, up from roughly 47% in the first half of the year. Approximately two-thirds of follow-on offerings were catalyst-driven, rather than opportunistic, reflecting a market where investors were willing to support development programs with tangible clinical proof and de-risked paths to commercialization. This trend suggests that while the capital “thaw” is underway, the market remains highly disciplined, rewarding companies that successfully translate scientific innovation into measurable productivity. This has been supported in part by a larger reallocation of capital out of AI and technology and back into biopharma, which has suffered from an under allocation for the past several years.
The venture capital ecosystem stayed relatively steady in 2025, with biopharma companies raising $24.6 billion as compared to $27.8 billion in 2024. Venture investment favored companies with advanced therapeutic pipelines with near-term clinical and commercial potential. Further evidencing this trend is the widening gap between aggregate investments in Seed and Series A rounds versus Series B rounds and later, with $8.7 billion invested in early stage rounds in 2025, compared to $16.0 billion in later-stage rounds.
Looking ahead to 2026, there are continued reasons for optimism. With the VIX ending the year at lower levels and the XBI finishing up 35% for 2025, the foundation for a sustained bull market in life sciences appears solid. A large IPO backlog remains poised for a greater number of public company debuts, and the increasing commonality of non-concurrent, catalyst-driven deals for larger companies suggests a return to a more normalized and robust financing environment.
Special thanks to Jefferies for contributing data regarding 2025 biotech new issuances.