Each quarter, Locust Walk’s deal team compiles key statistics and trends on strategic transactions and financings. Our 2023 Year-In-Review Report applies the latest data to analyze current activities in the life sciences deal landscape. Biopharma public market conditions improved towards the end of the fourth quarter, concurrent with a slew of >$1B acquisitions by large pharma, though private fundraising activity remained depressed. The XBI rose above $90 a share to its highest levels since February 2023, while the S&P 500 ended the year up 24%.

• After a relatively sharp decrease in October, the XBI closed up 8% over the last 12 months, finishing the year above $90 a share and erasing the large slumps observed in March and October
• The S&P 500 rose 16% over the final quarter of the year, as the Fed held rates steady and indicated three potential cuts in 2024
• An additional positive indicator for the biotech sector, the number of companies trading below cash dropped 17% in December after holding steady with Q3 levels in October and November
• Increased XBI and S&P 500 performance shows signs of lessening macroeconomic headwinds; indicating the potential for a gradual biotech recovery as total M&A and licensing deal aggregate value increases

While IPO volume decreased relative to Q3, follow-on offering volume increased by 125% with performance for these companies generally positive.

• Q4 saw the greatest number of follow-on offerings since Q1 2021 (e.g., 18 follow-ons >$75M); While IPO volume decreased, post-IPO performance on average was up 15%, suggesting a softening of the challenging public market environment in 2023

While venture financing volume in Q4 decreased, 2023 aggregate deal value remained consistent with values achieved in 2022 (e.g., $10.2B vs $11.0B).

• New investor interest in Series D & Later saw the greatest growth, with data suggesting new investor interest expanded through all series stages
• Average round size decreased substantially this quarter (i.e., -33% decrease over average deal value from Q3 to Q4), as the total volume of rounds >$20M decreased from 39 in Q3 to 32 in Q4

The end of the fourth quarter saw numerous multi-billion-dollar big pharma acquisitions (i.e., 7 deals >$1B in December 2023), suggesting positive momentum for the biotech transaction landscape moving into 2024.

• Of the 20 M&A deals that occurred in Q4, 11 were >$1B+ in value, and the aggregate quarterly M&A deal value of $60B was the greatest observed since Q4 2020

While the thawing of biopharma public markets and significant volume of billion-dollar large pharma acquisitions represent much needed positive indicators, Locust Walk contends that the overall recovery will be gradual and will likely take longer than many are anticipating. We invite you to read our report and welcome the opportunity to discuss its contents with you.