Cancer and Neuroscience Led 2023 VC, M&A Investment in Biopharma

Arrows pointing upward2_Nicole Bean

Pictured: Collage of neuroscience and cancer research rising/ Nicole Bean for BioSpace

2023 was, by all accounts, a down year for investment in biopharma, and it ended on a low note with declines in licensing deals, venture investments, IPOs and M&A transactions in Q4, according to J.P. Morgan’s 2023 Annual Biopharma Licensing and Venture Report. But the year did bring significant investment for the oncology and neurosciences spaces—a trend experts expect to continue into 2024 and beyond.

Neuro’s Late M&A Push

A fourth-quarter push lifted the neuroscience space to the second spot in terms of revenue generated from M&A activity in 2023, according to an IQVIA report. December alone saw AbbVie scoop up Cerevel Therapeutics for $8.7 billion while BMS—whose blood clot–prevention drug Eliquis (apixaban) is one of the first 10 drugs set to be affected by the Inflation Reduction Act’s Drug Price Negotiation Program—picked up Karuna Therapeutics and its schizophrenia candidate KarXT for $14 billion.

“Large companies have patent issues and revenue gaps to fill and right now, we have multiple later-stage neuro companies that are being bought,” said Graig Suvannavejh, senior biopharmaceuticals and biotechnology equity research analyst at Mizuho Americas.

The sector’s seed and Series A investment total of $639 million was second only to oncology, according to J.P. Morgan. Suvannavejh said there are multiple reasons for the VC interest. “One, we continue to see very good innovation, new targets that are being identified. And on some of the targets that have been identified in the past five to ten years, there’s been clinical data that have supported that if you try to go after a certain novel target, you are seeing some benefits.” 

In addition, Suvannavejh said that the current regulatory environment has encouraged investment. “I think industry, and VC in particular, are looking at the trends and [seeing] an FDA that is being more constructive . . . particularly in the neuro division.” This tone of regulatory flexibility was set under Billy Dunn, he said, “who was very understanding of the unmet medical need” and wanted to work cooperatively to support industry’s efforts to bring drugs to the market. Suvannavejh pointed to examples including the controversial approval of Biogen and Eisai’s Alzheimer’s drug Aduhelm and the eventual approval of Amylyx Pharmaceuticals’ Relyvrio, which came after a rarely granted second advisory committee meeting and “was based on positive biomarker data and not positive data on harder efficacy-based outcome measures.” 

Finally, the recent acquisitions of both small and large neuroscience-focused companies incentivize entrepreneurs to start new companies, Suvannavejh said, “especially if they think they have something better.”

Drilling down, Christiana “Chris” Bardon, co-managing partner of MPM BioImpact, pointed out that more VC investment was seen in the neuropsychiatric space as opposed to neurodegeneration, noting that the latter is “a very hard scale for smaller biotech companies to take on.” A lot of Alzheimer’s drug development resides within larger pharmaceutical companies, she said, because those programs are difficult to de-risk early.

Oncology Dominates Early-Stage Investment

In 2023, $3 billion was raised across 37 seed and Series A rounds, and $1.4 billion of these funds went to cancer-focused companies, nearly double the funds garnered by second-place neuro, according to J.P. Morgan. The sector also led M&A investment, headlined by Pfizer’s $43 billion acquisition of antibody-drug conjugates (ADC) leader Seagen. Other notable deals included AbbVie’s $10.1 billion acquisition of ImmuoGen and Eli Lilly’s $2.4 billion buyout of DICE Therapeutics.

“Oncology . . . is huge because there are some successes but there’s still a huge medical need,” said Ansbert Gadicke, managing partner at MPM BioImpact.

Drawing the most significant M&A revenue in this space last year were ADCs. At the heart of the AbbVie/ImmunoGen deal was the company’s ADC for platinum-resistant ovarian cancer, which won the FDA’s Accelerated Approval in 2022.

Bardon said ADCs have come into a renaissance. “You had the first generation, which were kind of okay, but not that great,” she told BioSpace. “But now we’re seeing sophistication in terms of our ability to engineer linkers, to engineer different payloads, to engineer novel, creative payloads . . . and we’re seeing dramatically improved efficacy and application in that space.”

And ADCs aren’t the only cancer modality having a moment. Two of fall 2023’s biggest deals involved radiopharmaceuticals. Gadicke said that following Novartis’s 2018 acquisition of Endocyte and Advanced Accelerator Applications, other pharmaceutical companies started looking at the space. Also contributing to the interest is that “manufacturing bottlenecks have been solved,” he said, noting that Bristol Myers Squibb’s $4.1 billion acquisition of RayzeBio and Lilly’s $1.4 billion buyout of Point Biopharma were “mostly related to manufacturing.” 

Honorable Mentions

While the oncology and neuroscience spaces ate up a significant percentage of the M&A and VC investment dollars, ophthalmic, autoimmune and cardiovascular companies also drew early VC funds, and immunotherapy and immunology (I&I) saw $12.3 billion in therapeutic M&A action, according to data collected by biotech entrepreneur Andrew Pannu.

I&I could be a particularly attractive space, Pannu said, because of its “pipeline-in-a-product” potential. “Pharma is clearly enamored with assets that . . . can expand into adjacent indications and build a monster brand,” he told BioSpace. “We see this in oncology, but it’s really the most common in I&I.”

For example, he noted, many assets approved in rheumatoid arthritis are also approved in plaque psoriasis, psoriatic arthritis, inflammatory bowel disease and more indications. Recent deals, such as Merck’s $10.8 billion acquisition of Prometheus Biosciences and its late-stage ulcerative colitis and Crohn’s disease candidate, PRA023, highlight the industry’s continued willingness to pay for this type of asset, he said.

Meanwhile, the autoimmune space “is more or less exploding right now,” Gadicke said, adding that “it will get much larger” in 2024. “That always happens when you have a major need, and suddenly people see progress that’s bigger than expected." As an example of this progress, Gadicke pointed to a 2022 study that showed five lupus patients were in remission eight months after treatment with a CAR T cell therapy. All patients remained in remission after at least 14 months, according to data presented at the 2023 American Society of Hematology (ASH) annual meeting.

In December, PwC released its US Deals 2024 Outlook report, in which it predicted an overall M&A deal value of between $225 billion and $275 billion. If realized, this would be a considerable jump from 2023’s total of $128.8 billion across 112 acquisitions.

On the question of where these dollars will go, “I have no doubt that oncology will continue to be number one,” Gadicke said. “My guess is that CNS will probably stay as number two, but I would predict that autoimmune will surpass ophthalmic and . . . move into number three.”

Heather McKenzie is a senior editor at BioSpace. You can reach her at Also follow her on LinkedIn.

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