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

Biopharma market conditions held steady in Q4, with steady improvements in venture financing and follow-on offerings coupled with a 70% increase in strategic deal value compared to prior quarters.

In 2024, the XBI significantly underperformed the market, ending the year flat (-0.2%) vs the S&P 500 which gained 24 percentage points.

• • Positive clinical readouts, strategic M&A activity, and Federal Rate cuts helped stabilize the index, but political uncertainty surrounding the U.S. elections in November, the nomination of RFK as HHS, and the expectation of fewer rate cuts in 2025 erased late-quarter gains.
  • The Federal Reserve’s forecast of additional interest rate cuts in 2025, although fewer than originally predicted, is expected to ease capital constraints and improve overall market conditions, with rate cuts potentially stimulating greater investor participation from generalist funds.

Public equity financing activity remained resilient in Q4 2024, driven by strong follow-on activity (>$5B for the fourth consecutive quarter), which continued to provide reliable capital access for companies with clinical data despite broader market uncertainties.

• • IPO activity, which had shown some signs of recovery earlier in the year, stalled in Q4, with no new IPOs in November or December.
  • While the IPO market will reopen further in 2025 compared to 2024, activity is likely to remain focused on companies with Phase 2+ assets, insider support, and clear near-term value inflection points​.
  • Follow-on offerings are likely to remain the primary mechanism for public companies to access capital in 2025 on more favorable terms.

Venture financing in FY 2024 showed continued improvement in total deal value increasing by 59% compared to 2023; however, total volume of financings only inched forward (168 vs 162 in FY’23), signaling that clinical development is increasingly expensive and an aversion to taking financing risk.

• • Despite the growth in avg. deal sizes compared to prior years, the total number of deals remained flat, underscoring a selective funding environment.​
  • Financings throughout 2024 concentrated on later-stage opportunities, with a high density of Phase 2 and later-stage deals reflecting a sustained preference for de-risked assets nearing key value inflection points.

Licensing transactions rebounded strongly in Q4 2024, with aggregate deal value increasing by 135% from Q3 2024, and discovery and preclinical assets represented over 60% of aggregate deal value in FY 2024 as large pharma sought to replenish their early pipelines to prepare for the looming patent cliffs.

• • Early-stage discovery and preclinical assets remained a focus for licensing deals, particularly for complex modalities.
  • Q4 saw nine M&A transactions, marking the lowest deal volume and aggregate value of the year; however, M&A activity could increase in 2025 if acquirer valuations normalize and there is a more lenient regulatory environment, with buyers targeting high-value opportunities in CNS, oncology, and other high-priority TAs.

While 2024 ended on a cautiously optimistic note, further recovery will hinge on sustained macroeconomic stability in the US, with business-friendly policies and an improved political and regulatory environment for US biopharma.

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