Despite positive momentum in the life sciences capital markets throughout 2024 and expectations for increased favorability in both public and private investment avenues in 2025, the second quarter of 2025 continued a trend of subdued activity for the sector. As of mid-2025, life sciences companies continue to navigate a challenging financing environment, as evidenced by the statistics below and against a backdrop of the XBI and BBC both suffering moderate declines while the broader market is up 8% for the year. In the public markets, public equity capital remains scarce and issuers are heavily favoring confidential offerings to mitigate market and execution risk following key clinical read-outs. In the private markets, venture capital investors remain selective and are favoring de-risked, later-stage assets, while smaller, early-stage companies are continuing to weather an extended “biotech winter”.
IPO Market
- Zero IPOs in Q2 2025: IPO activity has stalled. For the first time in over a decade, no biotech IPOs priced in the quarter and only four IPOs have priced in the first half of the year (also a 10-year low).
- Weak aftermarket: Many of the companies who priced IPOs in Q1 2025 underperformed in Q2, with an average offer-to-end of Q2 price of -18.7%.
Given the continued weakness in the IPO market, we expect that we will continue to see biotech companies look to alternative going-public structures, such as reverse mergers and de-SPACs, which offer greater certainty of valuation and outcome at the start of the process.
Follow-ons and PIPEs
- Follow-on issuances down 49% YoY: Q2 2025 saw $4.3 billion raised across 22 follow-on offerings, which is down from the $7.6 billion that was raised across 43 deals in Q2 2024.
- PIPE activity off 65% YoY: PIPE offerings raised just $0.6 billion in Q2 2025, compared to $2.3 billion in Q2 2024.
- Deal structure: Of the offerings completed in Q2 2025, 87% of follow-ons were confidential offerings (PIPEs, wall-crosses, registered directs) reflecting issuers timidity in relying on the public markets to appropriately price transactions, including to account for catalysts, and 76% were catalyst-driven (typically in conjunction with data releases), underscoring the general unavailability of opportunistic financings.
Private Company Financings
- Proceeds lowest since Q4 2023: 37 private rounds raised $3.6 billion, down from 43 rounds that raised $5.9 billion in Q4 2024.
- Reduced deal activity: Q2 2025 saw 37 private company financings versus 46 in Q1 2025.
- Later-stage shift: Series C+ rounds comprised 30% of Q2 2025 transactions (versus the 24% of the trailing three-year quarterly average), signaling both that companies are staying private longer before tapping public markets and the earlier-stage fundraising remains challenging. This trend is likely to continue until the IPO window re-opens more broadly.
- Decreased preclinical funding: The percentage of financings completed by preclinical companies dropped by 10% to 28% of all private rounds, versus 38% in both 2023 and 2024 underscoring investors’ limited appetite to take on scientific risk.
- Mega-rounds retreat: “Mega” financings ($100 million+) fell to 41% of deals, the lowest since Q4 2023.
Special thanks to Jefferies for contributing data for this blog post.