Each quarter, Locust Walk’s deal team compiles key statistics and trends on strategic transactions and financings. Our Q2 2024 Report applies the latest data to analyze current activities in the life sciences deal landscape.

Biopharma market conditions improved further in Q2, driven by significantly increased activity in the private markets, while strategic deal making remained limited and consistent with Q1 2024.

The XBI has meaningfully diverged from the S&P 500 in Q2, mainly due to tailwinds seen in big tech and AI, rather than biotech headwinds.

• Key drivers of this divergence include the XBI being more affected by the higher-than-expected CPI reading in April compared to the S&P 500, and the record-breaking growth of AI/tech companies (i.e., Nvidia alone accounts for more than a third of the S&P 500’s gains in 2024).
• While the continued boom in the AI/tech industry suggests that generalists’ return to biotech may continue to be gradual, conditions in the private and public biotech capital markets have improved substantially in H1 2024, with total deal value exceeding total value in 2023 (i.e., $30B for H1 2024 vs. $27B for 2023).

The public biotech markets have improved but continue to remain challenging for earlier stage companies with less robust data, as evidenced by the relatively closed IPO market and strong follow-on market that was mainly accessed by later-stage companies on the backs of positive data readouts.

• Only three new companies went public in Q2 2024, of which two raised a concurrent PIPE, indicating modest market interest; the IPO window remains shut to all except a selection of late stage, de-risked approaches with insider support and sufficient near-term news flow.
• Aggregate value of follow-ons has cooled from the robust activity seen in Q1, but average capital raised ($178M) in Q2 is up over 47% relative to the 2023 quarterly average, highlighting the accessibility of capital for more de-risked later stage companies with strong data.

Venture financing continued to increase from Q1, making the best quarter in since 2021 and signaling positive investor sentiment and belief in private investment exit potential; however, the larger average deal sizes with flat deal volume in Q1 highlight the dichotomy between the haves vs. have nots.

• Q2 saw a more even investment split across development stages, but 2024 activity in aggregate remains bifurcated, focusing on lower-risk, clinically-validated opportunities (e.g., Phase 2+) and promising, nascent preclinical/discovery opportunities led by exceptional teams. 
• Average round size continued to increase this quarter to $126M (i.e., 53% increase over average deal value from Q1 to Q2), with new investor participation in Series B and later deals reaching highest levels seen in the last 12 months.

Aggregate Q2 M&A and licensing deal value is on par with the relatively limited activity seen in Q1, with volumes lower than any quarter in 2021 – 2023.

• Discovery and preclinical deals continue to dominate the majority of licensing deal value, whereas M&A has continued Q1’s trend of increased exposure to earlier-stage opportunities (vs. late-stage/commercial focus in 2022/23), with most of Q2 deal value concentrated in Phase 2 companies.

While the improvements in the biopharma private and public markets signal a continued positive recovery for H2 2024, the downturn in strategic deal making and reliance on future rate cuts suggest that the biotech recovery will continue to be a gradual process.

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