M&A is back, the S&P XBI is rising again, a biotech pulled off an IPO and positive data is pulling in investors again. This may just be the industry’s new normal.
Finally, after years of brutal recalibration, multiple biotech market biomarkers are starting to trend in the right direction. M&A has returned; the S&P Biotech ETF (XBI) has climbed 43% in six months; multiple biotechs have issued positive, exciting news that reinvigorated investors; venture capital picked up in the third quarter with multiple megarounds, particularly those with crossover interest; and at least one biotech has pulled off a successful IPO.
“All of the elements that you would normally expect to drive a rally have converged and occurred over the last few weeks,” Maha Katabi, general partner for Sofinnova Investments, told BioSpace in an interview.
While this is a welcome sign, experts say there’s still a way to go before declaring the industry back from the brink.
“I’m not really sure if biotech is back, but I think companies with good data will find capital available,” said Akshay Rai, principal at Premji Invest, which participated in a $150 million series D for AI biotech Enveda in September.
Bill Gadless, founding partner of healthcare and pharma marketing firm emagineHealth, agreed. “It’s the first durable rally we’ve seen since the pre-pandemic cycles,” he wrote in a LinkedIn post last week. “But don’t confuse motion with momentum. This wasn’t a market comeback. It was a filter tightening.”
Defensive Signals
The experts zeroed in on the megarounds—a seemingly strong signal of market interest, but not a telltale signal of the sector’s health. Katabi posited that firms are raising money to shield themselves in the unpredictable macroenvironment.
“A lot of these financings are to me a defensive sign with respect to what might happen next in the market,” she said. “Because if you’re fully funded as a private company to hit clinical, meaningful catalysts, that’s what you need to continue to create value, regardless of where the market lands.”
Mayo Venture Partner Audrey Greenberg said the rally has continued a trend of concentration defined by larger checks to fewer companies. She pointed to massive raises like Kailera’s $600 million series B for a Phase III obesity trial and Tubulis’ $361 million series C to support its next-gen ADC therapies.
“There is a fresh burst of mega checks, but it’s in areas of concentration rather than a broad rising tide,” Greenberg said in an email to BioSpace. “Hot themes and later-stage names are getting outsized dollars while early deals are still quite tight.” Many of the larger megarounds have included sovereigns and large general partners, which suggest “deep-pocketed capital picking category leaders,” Greenberg added.
Obesity and AI are the big winners, plus oncology headlines like ADCs. “Call it what it is: an AI summer and a biotech winter, coexisting in the same ecosystem,” Gadless wrote. “If you’re ARCH, OrbiMed, or RA Capital, you’re writing nine-figure checks to Phase 2+ companies with data, patents, and pharma partners. If you’re a founder without human data, you’re not even in the conversation.”
Indeed, seed and series A volumes tumbled in the second quarter, Greenberg said, suggesting a still-depressed environment for early-stage fundraising. First financings in particular hit multi-quarter lows, pointing to trouble for new company formation, she noted.
“So yes, megadeals are back but they’re barbelled with a few winners raising $200M–$600M while company formation and A-rounds are struggling,” Greenberg said.
Rai agreed but said that one positive is that early-stage rounds, while still hard to come by, do seem to be ticking up in size, with investors writing bigger checks to safeguard against a rocky market.
“They are now budgeting for a longer runway,” Rai said of early-stage investors. “The earlier rounds are bigger because investors realize that companies need to achieve a broader set of milestones before they can get later-stage investors involved.”
Biotechs also cannot go public as quickly as they did in the pandemic heyday, from 2021 to early 2022, when many pre-clinical companies did IPOs, only to languish on the markets.
“All of those companies are yet to get a drug to approval, or even to very late stages, which has kind of created a little bit of skepticism around what needs to be done before you [IPO],” Rai said.
Companies nowadays must have hard data and advanced assets to even think about going public.
LB Pharma—which has been around since about 2017, according to data from PitchBook—successfully broke the IPO stalemate in September. The biotech is centered around a new formulation of a schizophrenia drug that’s already approved in Europe, with a Phase III trial slated to begin early next year.
“I wouldn’t say the IPO market is closed for biotech. I would say what is happening is the companies going public need to have enough talking points to build up that excitement,” Rai said.
That can be challenging for smaller companies with just one portfolio asset right now, whether they are pitching for a regular fundraise, crossover interest or an IPO. In the pandemic craze, companies had a wide range of willing investors interested at any stage. That’s not the case anymore, Rai said: “Now there is a little bit of a vacuum in terms of how many investors you can approach for some of these.”
“From 2020–2022, startups could raise on a slide deck and a dream. In 2025, you need proof, pedigree, and a plan,” Gadless wrote.
Value Multiplication
Enveda has more than a dozen assets in its pipeline, all pulled from the AI-enabled biotech’s platform that searches for new therapies among plant-derived molecules. CEO Viswa Colluru said raising the company’s latest $150 million—a series D closed in September—was relatively easy. They weren’t exactly looking but existing investors were keen to contribute.
“It was not a round that we were needing to raise, which I think speaks a little bit to the underlying nature of the market today,” Colluru told BioSpace. “Strong companies that have massive value multiplication opportunities and have catalysts that are proximal to or in the clinic and have validated interest from the broader ecosystem . . . are finding it relatively facile to raise.”
The decision-making process on the raise took about a week, then about a month total to have signed term sheets in hand, Colluru explained.
Enveda raised its seed in August 2020 and a series A in June 2021. Then in 2024, fundraising accelerated with a $174 million series B in June. There was a $150 million series C this February, followed by the unexpected $150 million last month. Easy as it may have been to raise the latest funding, Colluru did admit the market is much tighter than in the early days of his company. Now, new investors are hard to come by, and companies need to play the long game and build relationships to boost their later rounds.
“If you’re looking to catalyze a financing, I think it’s very important to pre-familiarize yourself with the capital base and get people interested in your story a round or two before and show that you can deliver,” Colluru said.
Just Good Science
Other positive signals for biotech’s return have been the achievement of some clarity around policy points such as drug pricing and tariffs, which have dogged the biopharma industry since January.
The return of M&A over the third quarter has also brought cheers from the industry. Merck bought Verona for $10 billion; Genmab nabbed Merus for $8 billion; and Pfizer snagged the inevitable M&A target Metsera for $4.9 billion upfront.
Big Pharma isn’t nibbling—it’s buying pipelines. “With over $230B in U.S. revenue at risk through 2030 from loss of exclusivity, refilling the pipeline isn’t optional; it’s existential,” Gadless wrote. “If pharma doesn’t acquire, it dies of R&D starvation. If venture can’t exit through IPOs, it survives through M&A.”
Deals are a great signal alone, but Katabi notes that it also means an exit for investors, allowing them to recycle that cash back into the industry.
Another undercurrent is the recent rush of high-profile positive clinical trial readouts such as uniQure’s Huntington’s disease win. “The rate of positivity of clinical trial catalysts was less than 40% in the first half of the year. Now we’re sitting closer to 50 or slightly above 50%,” Katabi said. This change may seem subtle, but Katabi insists it’s a big deal that can help ignite excitement in the industry.
To fuel that excitement, though, biotechs need to come with the goods. The third quarter seems to have set a tone of discipline, which is likely the new normal, according to Gadless. “Q3 didn’t bring back the party,” he wrote in his post. “It brought back reality.”
But while investors’ purse strings may not be fully open, Colluru said the science has never been better—and that, in the end, will keep biotech churning.
“My attitude has always been that if you create products that make the world a better place, then you will get to capture some of that value as a return,” he said. “The signals for that have never been stronger from a pure bottom-up perspective, in terms of the exciting science that’s going on today.”
