A longer ‘winter’: Public funding slowdown heightens pressure on biotech startups
4 min read
Biotechnology industry watchers were hopeful at the start of 2025. Venture funding appeared to be rebounding after a lengthy slump, and a smattering of new stock offerings and company acquisitions brewed optimism that the public markets might be similarly warming up to young drugmakers.
But the positivity quickly dissipated. Trump administration policies gutted scientific research funding and raised questions about U.S. drug prices. Large layoffs and upheaval at public health agencies created regulatory turmoil that added risk to what’s already, by its nature, a risky sector to invest in.
The results were laid out in a June report from David Windley and Tucker Remmers, two analysts at the investment bank Jefferies. According to that report, funding in public biotech companies — be it from initial public offerings, follow-on stock offerings, or “PIPE” deals — plummeted in May. The “political and economic uncertainties” have “cast a cloud over biotech investment,” they wrote.
“Since product development cycles can range 12-15 years in this industry, biotechs (and their boards and investors) want clarity on FDA regulation, drug pricing, and funding before committing to large, [long-term] investments,” Windley and Remmers wrote.
Investors and industry insiders interviewed by BioPharma Dive say that the public slowdown is trickling down to startups that have already been under intense pressure during a prolonged pullback. Companies and investors are struggling to align on valuations, making funding rounds more difficult to close than in prior years. The uphill battle in the public markets is further delaying IPO plans, too.
“People are waiting to see what happens, and it’s extended that winter,” said Tim Scott, the president of Biocom California, an industry trade group.
To date, only seven biotech companies have priced IPOs in 2025, and no large offerings have occurred since mid-February. No biotechs have publicly disclosed IPO ambitions in several months either, and one of the last to do so, Odyssey Therapeutics, pulled its offering in May. In a letter to the Securities and Exchange Commission, CEO Gary Glick wrote that it was “not in the best interests of the company” to go public at that time.
One reason IPOs have ground to a halt, experts say, is that the public markets aren’t rewarding drug startups as predictably as they once were. Typically, drug companies can expect their value to climb after delivering positive clinical results. But “even companies with good data aren’t seeing a lot of movement in the public markets,” said Jonathan Norris, a managing director at HSBC Innovation Banking.
As a result, Norris said, companies are looking at the time and expense it takes in the monthslong process to go public and wondering: “What’s the benefit?”
“If you have any readouts that are even eye squinting, you’re going to get crushed,” he said. “It’s a tough, tough endeavor.”
The shuttered IPO window is exacerbating problems for young biotechs. “If you don’t have a public market opportunity, then the companies that are private have to think about ways to raise capital and stay private for longer,” said Maina Bhaman, a partner at Sofinnova Partners.
Feeling that burden, venture investors are becoming more conservative. While private funding hasn’t plummeted as much as its public counterpart, investors are more selective and slower-moving. Funding has become increasingly consolidated into fewer and larger “megarounds,” to the extent that more firms are compiling similar portfolios. And they’re hard to finalize, even when most of a funding syndicate is already onboard, according to Norris.
“People are struggling to figure out where the bottom of the market is and what’s the appropriate valuation and expectation for that investment,” he said.
“A lot of VCs are pencils down right now on deals they would otherwise be moving forward on,” Scott added.
Pullbacks are nothing new in biotech. But what has been unusual, some say, is how long the sector has spent in the doldrums after peaking in early 2021. One reason is the most recent boom flooded the market with more companies than it could support. But another is that the ensuing correction has intensified amid regulatory and political upheaval.
A report last week from Roel van den Akker, PwC’s U.S. pharma and life science deals leader, predicted that companies will be “preparing contingency plans” to account for delays in “trial oversight” and drug applications.
Drug companies are used to dealing with a high level of risk, as most experimental medicines never make it to market. But “now you’ve got a lot more macro uncertainty that is being layered on top,” Bhaman said.
On the public side, that uncertainty has resulted in less patient investors, some of whom are pressing company boards to shut down after setbacks rather than change course. But some startups are taking drastic steps, too, such as cutting programs and staff to, some experts believe, depress their value so they can still attract investment.
The “lack of surety” is pressuring biotechs to be as efficient as possible with their cash, Scott said, perhaps working on one program instead of a few.
There have been multiple high-profile examples of late. Eikon Therapeutics and Insitro, two well-funded startups, both cited a need for “prudence” in laying off staff.
Norris expects more companies to proactively cut staff, or even close, as the longer-than-expected winter drags on.
“Most of those companies are not going to find the investors that they’re hoping for,” he said. “And I think that’s just the unfortunate truth.”
