Life Sciences Under the Microscope: Key 2024 Takeaways and What’s Ahead for 2025

The life sciences industry experienced a dynamic year in 2024. As the public markets gained traction, IPO activity and venture investment saw a resurgence, signaling renewed investor confidence and reflecting sustained interest in biotech innovation. However, the M&A market presented a mixed picture, with overall deal values declining, but deal volumes remaining robust. Licensing deals, particularly those involving biologics, later-stage assets, and GLP-1 and GIP-targeted therapies, continued to play a crucial role in shaping the industry landscape. This article delves into the key trends of the sector in 2024 and offers insights into what lies ahead for 2025 given driving trends and the new administration.

Market Trends

The public financing markets gained modest traction in 2024, allowing for a steady resurgence for the life sciences industry. The U.S. biotechnology stock average, as measured by the S&P XBI, was generally volatile over the course of 2024, but ended the year modestly higher than it began. IPO activity also saw a significant uptick, with $3.8 billion raised by 19 companies going public in 2024, compared to $2.7 billion from 13 IPOs in 2023, according to JP Morgan¹. The largest IPO occurred early in the year, setting high expectations, when CG Oncology raised $380 million in January. Later in the year, there were signals of continued investor confidence when Bicara Therapeutics, Zena BioPharma, and MBX Biosciences collectively raised over $700 million on a single day in September².

According to Stifel, biotech and healthcare IPOs accounted for 23% of total U.S. IPO proceeds in 2024, indicating a renewed interest by investors in the sector. However, many of these companies experienced significant declines in their share price following the IPO.³ Similarly, follow-on offerings began strong in 2024, but tapered off as the year progressed. While the strong start to 2024 was not sustained throughout 2024, we still view the public follow-on market as trending upward, with annualized follow-on value reaching $52 billion in 2024, compared to $36 billion in 2023 and a historic peak of $86 billion in 2020.⁴ Commentators expect this positive trend to continue into 2025, but certainly not to the extent of the peak levels seen during the COVID-19 boom.⁵

Venture equity investment in the life sciences sector experienced a significant surge in 2024. According to Stifel, annualized venture equity deals in the sector totaled over $50 billion, a significant increase from $33 billion in 2023.⁶ Notable deals included Xaira Therapeutics raising over $1 billion in April in a Series A round, reflecting sustained interest in AI for drug discovery, and Mirador Therapeutics securing $400 million in a Series A round for precision medicine.⁷ Overall, 2024 was the third most active year for biotech fundraising in history based on aggregate deal value. Series A and Series B venture financing in biotech companies also saw a substantial increase in 2024, but with a notable focus on certain “hot” assets, and a flight away from certain other asset classes, including expensive-to-develop cell therapy treatments. In 2025, analysts expect an overall increase in venture capital volume, with the trend towards larger funding rounds and the continued incursion of tech VCs into healthcare, particularly in areas like AI in healthcare delivery, suggesting a positive outlook for biotech venture equity deals in the coming year.⁸

Deal-Making Trends

M&A centers on smaller value deals and early-stage assets

The M&A market in 2024 was relatively flat, with an overall deal value of $82 billion, significantly down from $178 billion in 2023, according to Stifel.⁹ The year saw no transactions for the acquisition of a biotech or pharma company that exceeded $5 billion, and while companies remained active in the M&A market, the values of the deals were notably lower than in past years. The largest biotech deal by upfront payment was the acquisition of Alpine Immune Sciences, Inc. by Vertex Pharmaceuticals in April for $4.9 billion,¹⁰ and the highest-value deal in the pharma industry as a whole was Novo Holdings’ acquisition of Catalent and certain of its manufacturing facilities for $16.7 billion in December.¹¹ These transactions are modest compared to, for example, Pfizer’s $43 billion acquisition of Seagen in 2023. Despite the drop in individual deal values, deal volume remained healthy. According to Stifel, there were still six acquisitions of public biotech or pharma companies for $1 billion or more, which is relatively high, albeit down from a record-breaking ten of such acquisitions in 2023.¹² Overall, 2024 had the sixth highest total number of M&A deals over $1 billion since 1995, with 15 public and private target acquisitions occurring during the year.¹³

One explanation for this trend toward smaller deal sizes is that acquisitions in 2024 tended to involve more early-stage assets compared to acquisitions in 2023; earlier-stage assets come with higher risk and thus attract smaller sums. According to Stifel, in 2024, only 20% of acquisitions involved Phase 3 or approved assets, down from 40% in 2023.¹⁴ It is important to note that, while a higher proportion of acquisitions involved earlier-stage assets, large pharmaceutical companies continued to spend more on later-stage assets overall than on early-stage assets, with Stifel reporting that $49 billion and $43 billion were spent on Phase III and Phase II assets, respectively, compared to $28 billion and $21 billion for Phase I and preclinical assets, respectively, reflecting the greater cost of purchasing later-stage assets given their higher likelihood of success.¹⁵

Looking ahead to 2025, commentators expect that changes associated with the new administration, including potential Federal Reserve rate cuts, bode well for deal-making activity, and a less hostile antitrust environment paints a positive picture for M&A specifically.¹⁶ Other factors that could spur M&A activity in the coming year include large pharmaceutical companies’ impending patent cliffs for certain blockbuster drugs, which could incentivize such companies to fill gaps in their pipelines by pursuing M&A opportunities.¹⁷ The JP Morgan Healthcare Conference set an optimistic tone at the start of 2025 with $18 billion in acquisitions announced on the first day of the conference, including J&J's $14.6 billion takeover of Intra-Cellular Therapies.¹⁸ Although M&A did not rebound as strongly as expected in 2024, there is a sense that 2025 will be an active year for M&A, with potential increases in both deal value and deal volume.

Licensing driven by lower upfront economics and focus on pipeline development

Licensing deal volume and upfront payments remained steady in 2024. According to JP Morgan, although the number of licensing deals in 2024 remained lower than its peak during the COVID-19 pandemic, the total number rose slightly to 148 compared to 145 in 2023, indicating that deal flow was relatively flat.¹⁹ However, in contrast with M&A deal values, the overall value of licensing deals improved, with deal value increasing from $174 billion to $183 billion. Notably, 28 licensing deals in 2024 involved upfront payments of $100 million or more, compared to 20 such deals in the previous year. In 2024, upfront deal value stabilized at approximately 7% of overall deal value, similar to 2023, continuing the trend of lower upfront economics seen since the peak of 13% in 2019. Analysts note that deal option payments and milestone payments have also helped bolster deal sizes, as they distribute the financial risk through development and commercialization.²⁰

Licensing deals relating to biologics, later stage assets, and GLP-1 and GIP-targeted therapies have notably impacted licensing deal values in 2024. According to JP Morgan, biologics led the way in licensing deal values, followed by small molecules.²¹ Advanced modalities, including cell and gene therapies, which are generally more expensive to develop, lagged behind. From 2023 through the third quarter of 2024, $4.9 billion in total announced upfront cash and equity was directed towards biologics licensing deals, with $3.1 billion directed to small molecule licensing deals. In contrast, the figures for more advanced modalities were much lower, in the multimillions.²² In terms of asset stage, large pharmaceutical companies’ focus on in-licensing late-stage assets has increased the value of programs nearing approval, with notably higher median upfront cash and equity payments for Phase II and Phase III deals in 2024 compared to 2023.²³ Finally, recent advances in GLP-1 and GIP receptor-targeted therapies have driven collaborative activity in 2024 with a focus on disease areas including obesity, diabetes, and other indications beyond metabolic diseases.²⁴ In 2024, deals focusing on GLP-1-, GLP-1R-, and GIP-targeted therapies had a total announced potential deal value of $8.0 billion, while deals focusing on obesity and diabetes totaled $6.4 billion in announced potential deal value, according to JP Morgan.²⁵

While licensing volume and upfront payments have remained steady in recent years, the impending patent cliff for large pharmaceutical companies is expected to incentivize companies to fill gaps in their pipelines, contributing to a promising outlook for licensing and collaborations in 2025. For instance, major drugs such as Johnson & Johnson/Bayer’s blood thinner Xarelto, Boehringer Ingelheim/Eli Lilly’s Jardiance, and AstraZeneca’s Farxiga will lose regulatory exclusivity this year.²⁶ Other significant patents set to expire in the next few years include BMS's Eliquis and Opdivo, Merck's Keytruda, and Amgen's Prolia and Xgeva, exposing these companies to substantial generic and biosimilar competition.²⁷ Commentators believe that an increased focus on external innovation and strategic partnerships will be crucial for companies seeking to maintain their competitive edge and ensure future growth.²⁸

Other Driving Trends

Surge in in-licensing from Chinese biotechnology companies

Cross-border licensing transactions involving molecules invented in China became increasingly popular in 2024. In 2024, a significant 31% of the molecules in-licensed by large pharmaceutical companies were sourced from China, up from 29% in 2023.²⁹ Moving forward into 2025, the availability of relatively inexpensive China-developed drug candidates is expected to boost licensing between biotechnology companies in China and biopharmaceutical companies in the U.S., according to Stifel.³⁰ While this collaboration may drive increased research and development in the biotech sector, these trends also could negatively impact U.S. biotech companies developing comparable molecules, as it may drive down the economics that licensees are willing to pay for such U.S. assets.

AI’s continued influence in drug discovery and innovation

The ongoing trend to integrate AI into drug development activities is expected to continue in 2025. Nearly 60% of biotech and pharma executives surveyed by Deloitte said they plan to increase investments in generative AI.³¹ However, while AI carries exciting potential, industry leaders caution against mistaking this hype for AI’s ability to immediately impact clinical trials in the shorter term. A Jefferies report notes that there is a long road to realizing AI’s full potential in biotech.³² Even now, not all biotech and pharma executives are optimistic that AI will significantly transform R&D productivity, voicing concerns particularly over data quality, significant data gaps, and still-murky regulatory waters, according to Stifel and LaBiotech.³³

Despite these reservations, 2024 saw the growth of a new AI-driven trend, which signaled strong enthusiasm from both life sciences and technology companies in deepening AI’s integration in biotech: “Techbio” refers to the trend of tech giants like Google, Microsoft and NVIDIA “taking more space” in the biotech sector, both through direct initiatives and strategic partnerships, according to Andrea Bortalato, Vice President of Drug Discovery at SandboxAQ.³⁴ For example, Amgen and NVIDIA announced a collaboration early on in 2024 for the use of NVIDIA’s DGX SuperPOD platform to build AI models trained to analyze one of the world’s largest human datasets to produce  “a human diversity atlas for drug target and disease-specific biomarker discovery,” and to “help develop AI-driven precision medicine models, potentially enabling individualized therapies for patients with serious diseases.”³⁵ NVIDIA took the stage again at the 2025 J.P. Morgan Healthcare Conference, announcing additional partnerships, including: with IQVIA to build custom AI models to speed up research and clinical development; with Illumina to enhance genomic analysis for drug discovery; with Mayo Clinic to develop advanced digital pathology models using NVIDIA’s DGX systems; and with Arc Institute to develop advanced AI models that can understand and analyze biological data like DNA, RNA, and proteins.³⁶ These collaborations between tech and biotech suggest that excitement in the space is likely to continue throughout 2025.

The continued consumerization of obesity-related drugs

2024 kicked off with pharmaceutical companies Novo Nordisk and Eli Lilly spiking list prices for their blockbuster diabetes drugs, and throughout 2024, the market for GLP-1s remained hot.³⁷ There were 24 obesity drug R&D and licensing deals signed in 2024 with a value totaling $6.4 billion, and many companies of all sizes announced GLP-1 development programs.³⁸ Although significant gaps remain in affordability and access, this increasing competition may drive down prices of drugs like Ozempic, Wegovy, Mounjaro and Zepbound. However, the companies behind these popular drugs are not keen to allow this to happen,³⁹ and many commentators have voiced their concern throughout 2024 over whether these companies would be able to meet the high demand for their drugs, particularly if the FDA chooses to restrict mass compounding.⁴⁰

Due to manufacturing and supply constraints, Novo Nordisk and Eli Lilly faced challenges meeting the overwhelming demand for GLP-1 drugs during commercial rollout. FiercePharma reports that CDMOs have been crucial for meeting near-term demand by providing immediate production solutions, particularly for the final fill-and-finish step of the manufacturing process, while both companies invest in building out their production lines for the long term, including Novo Holdings’ acquisition of Catalent in late 2024.⁴¹ This high demand is not expected to wane in 2025; 36% of respondents to a Jefferies’ poll said that obesity-related drugs will have the biggest impact in biotech and pharma this year.⁴² Although the commercial success of this class of drugs is expected to continue in 2025, one thing to keep an eye on is the selection of Ozempic and Wegovy for IRA Medicare price negotiations in 2027, along with 13 additional drugs. This announcement triggered a fall in Novo Nordisk’s share price, but the future of the IRA in the new Trump administration remains to be seen.⁴³

The Effects of the New Administration

Antitrust and the FTC

Two Trump nominees have signaled a new and biotech-friendly era for antitrust under the second Trump administration. Trump has chosen Andrew Ferguson to take the place of Lina Khan as chair of the FTC, whose leadership is likely to result in a lighter antitrust enforcement environment than during Khan’s term, according to a Stifel report.⁴⁴ President Trump has also chosen Gail Slater to head up the Department of Justice’s antitrust division, which the New York Times notes may mark a potential redirection away from the Biden administration’s vigorous enforcement of antitrust laws that has resulted in significant merger blockages.⁴⁵ According to BioPharma Dive, commentators in the industry expect that these leadership changes are good signs for increased biotech M&A activity.⁴⁶

HHS, tax cuts and the Biosecure Act

Significant uncertainty remains as to how the different personalities in the Trump administration will affect health and drug policy, and how that will reverberate through the life sciences industry.⁴⁷ On one side of the coin, President Trump has chosen prominent tech CEO Elon Musk, a high innovation, low regulation advocate, to lead the new Department of Government Efficiency (DOGE). Musk’s leadership could trend toward decreased oversight. On the other side of the coin, President Trump has picked Robert F. Kennedy Jr. to head up the Department of Health and Human Services. Endpoints News highlights the stark distinction between DOGE’s objectives and Kennedy’s perspective on biotech and pharma.⁴⁸ Kennedy is well-known for anti-vaccine views and has a skeptical view of the biotechnology and pharmaceutical industry, viewing it as underregulated and corrupt.⁴⁹ According to a Stifel report, upon the announcement of his nomination, the XBI dropped from 104 to less than 92, reflecting widespread concern in the biotechnology sector that Kennedy’s term will negatively impact public health infrastructure and policy.⁵⁰ Further, shares in vaccine producers like Pfizer, Moderna, BioNTech, and Novavax also declined after the announcement of Kennedy’s appointment.⁵¹

While there are concerns in the industry regarding the volatile personalities in the Trump administration, economists predict in a Stifel report that a bump for the market could come in the form of significant tax reductions enacted by the Republican majority in Congress.⁵² Tax cuts like the ones President Trump has supported would give big pharmaceutical companies massive tax breaks, according to Public Citizen.⁵³ That said, the boost to the industry that these tax breaks could provide may be tempered by proposed tariffs on countries including Canada, Mexico and China.⁵⁴ Endpoints News reports that Trump’s “America First” approach to international relations could give the Biosecure Act, a national security bill that would have the effect of limiting U.S. companies’ freedom to contract with certain named Chinese service providers, a better chance of passage, which could create hardships for US companies that are dependent on these Chinese companies.⁵⁵

Given all of these various and conflicting factors, the only certainty may be uncertainty. As Priya Chandran, leader of the Boston Consulting Group’s biopharmaceuticals team, expressed to Endpoints News at the J.P. Morgan Healthcare Conference in January, nobody “is in any position to predict exactly” what the ultimate impact on the life sciences sector will be.⁵⁶

Conclusion

The life sciences industry navigated a complex landscape in 2024, marked by a resurgence in public markets, robust venture investment, and a mixed M&A environment. Licensing deals, particularly those involving biologics, later-stage assets, and GLP-1 and GIP-targeted therapies, played a pivotal role in maintaining industry momentum. That complexity seems likely to multiply in 2025, as commentators note that several key factors are poised to shape the sector's trajectory. The impending patent cliff for a number of blockbuster drugs is expected to drive increased licensing and M&A activity as companies seek to fill gaps in their pipelines. Advances in AI and the growing consumerization of obesity-related drugs will likely continue to influence innovation and market dynamics. The increasing importance of Chinese-manufactured molecules and collaborations between U.S. and Chinese biotech firms may also play a significant role in shaping the industry's future. Finally, the new administration's policies on antitrust, healthcare, and international relations will introduce both opportunities and uncertainties.