Each quarter, Locust Walk’s deal team compiles key statistics and trends on strategic transactions and financings. Our 2024 Q3 Report applies the latest data to analyze the current landscape in life sciences deals.

Biopharma market conditions held steady in Q3, with a decrease in venture financings offset by the Fed’s rate cute, public market financings, and XBI growth.

The XBI posted a 7% increase in Q3 2024, recovering from earlier volatility and reflecting cautious optimism as macroeconomic pressures eased slightly.

• Strong clinical readouts and strategic deals (e.g., Lilly’s acquisition of Morphic) from major biopharma players were rewarded by investors and helped drive the rebound, signaling that the biotech recovery is gaining momentum heading into the final quarter of the year.
• Although the oversized Fed rate cut relieved some macroeconomic pressure it did not translate to XBI gains, with the XBI sliding 3% over the last 10 days of September and indicating that additional rate cuts are needed before a full recovery.

Public market conditions have meaningfully improved with the Fed’s rate cut as evidenced by increased IPO activity, healthy follow-on volume, and several SPAC merger announcements which have been extremely limited in the past two years.

• IPO conditions improved significantly, with 4 out of the 6 occurring in September, around the time of the rate cut, and 5 of 6 IPOs were upsized highlighting strong investor demand; however, almost all were Phase 2 companies or later, suggesting IPOs remain limited to more de-risked companies.
• Secondary offerings dominated public financings in Q3 2024, raising $5.5B as high-quality companies gained better access to capital on favorable terms, while PIPE deals were less prevalent.

Despite the momentum in the public markets, securing private financing remains challenging as seen by a flat volume of deals and a lower average deal size in Q3 as compared to Q2, and aggregate venture financings failed to reach the $5B mark for the 11th time in 12 quarters.

• De-risked modalities (e.g., small molecule, biologic) have attracted 69% of the venture deal value in 2024, 10% higher than the recent high of 59% in 2021, reinforcing investor preferences against stacked risk.
• Financings were concentrated in later-stage Series C and D rounds, with high insider participation as investors focused on solving short-term cash needs and reaching key value-inflection points before the IPO window thaws.

Licensing and M&A activity fell 30% from the already weak H1’24 levels, with no quarter in 2024 exceeding any prior quarters in terms of deal volume or aggregate value.

• Early-stage discovery and preclinical assets remained a focus for licensing deals, particularly complex modalities.
• Decline in M&A average deal values, coupled with limited deal volume—only 3 public companies were acquired—may reflect optimism in public markets and rising valuation expectations for M&A

While the equity markets improved, the necessity of strategic licensing deals as a source of non-dilutive capital has eased somewhat, though will continue to be an important driver for private, earlier-stage biotechs where the recovery is in its infancy and will take longer.

We invite you to read our report and welcome the opportunity to discuss its contents with you.