VC Investment Surges In Q2 As Financial Market Recovery Momentum Builds
Even after removing Xaira’s unusual $1bn seed financing, Evaluate’s data show that biopharma venture capital fundraising increased from the first to the second quarter and from Q2 of last year.
Venture capital investment in the biopharmaceutical industry is on an undeniable upswing, with two quarters in a row of fundraising in 2024 that outpace the activity seen in 2023, according to data from Evaluate Pharma. In Q2, 143 companies raised $8.08bn, up from Q1 when 132 raised $6.53bn.
The first quarter of 2024 also represented a big boost, with the highest dollar amount of biopharma venture capital raised since Q2 of 2022. The two-quarter trend seems to confirm commentary this year – first at the J.P. Morgan Healthcare Conference in January and then at the BIO International Convention in June – that while fundraising remains constrained relative to the boom years of 2020 and 2021, financial market conditions are improving.
Even excluding the unusual $1bn seed financing that artificial intelligence-powered drug discovery and development firm Xaira Therapeutics announced in April, the $7.08bn raised by the other 142 companies that Evaluate tracked in Q2 outpaced the Q1 total and every other quarter from the past two years. (See table below for quarterly data going back to the second quarter of 2020.)
Venture capital mega-rounds of $100m or more seemed to drive fundraising in Q1, with fewer companies raising larger rounds, which made sense as investors continued to put their money into start-ups with drug development programs in or nearing clinical trials or in later-stage companies with assets that might be attractive to big pharma buyers.
However, earlier-stage companies appear to be getting in on the fundraising action as 2024 progresses, since the average venture capital deal size came down in Q2. The average VC financing was $61m in Q1 but dropped to $56.5m in Q2 or $49.9m when excluding Xaira’s seed round.
Also, venture capital fundraising rose across deal categories in the second quarter, according to Evaluate’s data, with $1.24bn in financings below $50m (up from $1.07bn in Q1), $1.49bn in $50m-$100m deals (up from $1.39bn) and $5.35bn in $100m-plus mega-rounds (up from $4.07bn).
It remains to be seen if the trend in rising venture capital investment in biopharma will continue into Q3, but with growing optimism spurring a few new initial public offerings in the US in recent weeks, VC investors may queue up a few additional IPO prospects through crossover rounds. Two drug developers went public in the US in June, bringing the first half of 2024’s total to 12.
The stock market’s reception of the two newly public biopharma firms was mixed, however. Immunology-focused Alumis, Inc. had to downsize its offering to get it through the IPO window and fell below its offering price on its first day of trading. Central nervous system-focused Rapport Therapeutics Inc. priced its smaller offering in the middle of a proposed range and traded higher on its first day.
Earlier-stage companies appear to be getting in on the fundraising action as 2024 progresses.
Nevertheless, venture capital mega-rounds set up earlier-stage companies and start-ups to pursue their research and development programs without an immediate need to go public, and there were 27 mega-rounds in Q2, with Xaira’s seed financing topping the list. The start-up helmed by former Genentech, Inc. chief scientific officer Marc Tessier-Lavigne plans to build out its technology platform and capabilities while advancing its first drug candidates toward the clinic.
The second-largest VC round in Q2 was a $372m series D round raised by Formation Bio, another AI-powered drug discovery and development firm, at the end of June. Uniquity Bio followed Formation with a $300m financing in May backed entirely by Blackstone, to take its anti-TSLP antibody solrikitug into Phase II clinical trials in asthma and chronic obstructive pulmonary disease (COPD).
Metsera Inc. launched with $290m in the fourth-largest VC round of Q2. The company helmed by former The Medicines Company CEO Clive Meanwell is developing drugs for obesity and metabolic diseases. Rounding out the top five, AltruBio Inc. announced a $225m series B round in May to fund mid-stage trials of its immune checkpoint enhancer ALTB-268 in ulcerative colitis.
