The first half of 2024 was strong as M&As and financings dominate

Voiceover: The Bioworld Insider podcast.

Lynn Yoffee: This is the BioWorld Insider podcast. I’m Lynn Yoffee, BioWorld‘s publisher. The first half of the biopharmaceutical sector’s fiscal year is in the books. Drum roll, please. Financing’s in 2024 are already approaching 2023’s full year total. In the partnering space, biopharma deal and M&A values have already outpaced those of last year as well.

Our guest today is Karen Carey. She’s BioWorld‘s managing editor and our chief analyst. Karen checks in with us periodically to review the latest numbers so that we can see where the market has been and what it may be for the near future. She’s here today to talk about what seems to be a very lucrative first half of this year. Welcome, Karen.

Karen Carey: Thanks. Good to be here, Lynn.

Lynn Yoffee: She’s talking today with Lee Landenberger. He’s a BioWorld staff writer and the BioWorld Insider podcast host.

Lee Landenberger: Thank you, Lynn and Karen. Thank you. When we went through the first quarter’s numbers, the market seemed to be firming up. That was a few months ago. And today… it’s today. So let’s run through the financings first. It looks like they’re ready to possibly set an annual record. Can you give me some details?

Karen Carey: Sure, thanks Lee. So, as Lynn mentioned, if you take the two quarters combined, we’re at $70 billion for the first half of this year for financings. And that’s pretty much in line with last year’s full year, which had just under $71 billion. So financings are tracking up over last year by 130%.

First half financings were slightly higher in 2021, but other than that, we’re at the top of most years. But I should mention, if you look at it by quarter, in the second quarter, amounts raised were cut in half to about $23 billion. That is down by 51% from the first quarter, which had $47 billion. So we are seeing some significant slowing.

Lee Landenberger: Okay, how about private financings? How did they fare?

Karen Carey: VC financing, they reached just under $7 billion, $6.84 billion in the second quarter, which is up from Q1’s $5.65 billion. It is the highest VC amount for a quarter since the fourth quarter of 2021. By volume, there were 107 private financings in Q2 vs. 106 in Q1. So all in all, it’s good news for early stage biotechs, but mainly, I should say, those with solid science and strong management teams and innovative assets. That is what these investors are looking for.

Private financings of public companies like private placements or pipe financings, they brought in 8 .77 billion in Q2, slightly less than Q1. But combined, these types of financings are at their height, raising 18.6 billion in the first half of 2024. That’s 136% over the first half of 2023 and above all first halves in BioWorld records.

Volume-wise, there were 139 transactions in Q2 vs. 160 in Q1. Both of those are above each of the last three years. looking at just pipe financing’s though, for 2024, they have surpassed the full year 2023 total by more than three times.

They were at $1.56 billion through 10 transactions so far this year.

Lee Landenberger: And what are the top private financings from the second quarter?

Karen Carey: The top VC round in the second quarter and for the year was actually Xaira Therapeutics, $1 billion raise in April. I think you wrote that story, Lee. It’s a machine learning company focused on developing new therapeutics. Beyond that, Formation Bio raised $372 million through a series D and Metsera raised $290 million through a VC round.

As for private financings of public companies, both Organon through a senior secured notes offering and Zealand Pharma through an equity offering, each raised $1 billion in Q2. There was also a big royalty arrangement bringing Agios $905 million through a deal with Royalty Pharma. This was for its glioma candidate, which is under FDA review. Alvotech also secured $900 million through a loan facility. you know, there’s been some big ones there.

Lee Landenberger: So, IPOs, moving back into the public space, they had a great first quarter and a not so great second quarter. And wondered if you had some details to fill me in on who they were and maybe why all this happened.

Karen Carey: Sure. So, IPOs had 10 debuts in Q1, but only four in Q2. So just like the overall financing amounts raised, they were cut in half. And Q2 represents the second lowest quarter for IPO volume in a decade. Only 2023’s fourth quarter was lower with only three completed.

Looking at gross proceeds from IPOs, they reached 602.4 million in Q2, which is significantly down from Q1. Q1, you may recall, it recorded the huge Galderma IPO at more than $2 billion and is largely responsible, that one IPO, for IPOs trending higher than 2022 and 2023.

It is sort of a recovery story for IPOs. They weren’t doing well the last two years. However, the second quarter is disappointing and one of the lowest in recent years for IPOs. Continuum, Alumis and Rapport, they all debuted on NASDAQ while Xtalpi had its IPO on the Hong Kong exchange, each raised over a hundred million.

Also, I have information on follow-ons. Follow-ons were crazy good in the first quarter. They slowed down a bit in Q2 going from $27.6 billion to $6.73 billion and from 80 follow-ons to 48 follow-ons quarter to quarter. Overall though, much better than last year. The top Q2 follow-ons were Insmed’s $650 million, Cytokinetics $575 million, Intracellular’s $574 million and Structure Therapeutics’ $547 million.

Lee Landenberger: Okay, how about deals? The first half of 2024, the deal in M&A values outpaced last year’s numbers. So can you give me an idea of how these new numbers compare?

Karen Carey: Sure. So deals, when we talk about deals, we’re talking about collaborations, licensings, and joint ventures, as opposed to &As, we count those separately. So deals by the end of Q2 were at $97.6 billion. That’s 11% higher than the same period last year. And basically, it’s a record for a first half, according to BioWorld data.

The volume of deals was at 712 total for the two quarters combined, which is roughly 5 % more than last year. So maybe the volume isn’t going up as quickly as the value of these deals. you know, fewer deals that are worth more. Looking at it by quarter, the second quarter was better than the first. $53 billion vs. $44 billion.

But then if you go back to the fourth quarter of 2023, we were actually at $87 billion then. So we are outpacing the first half of last year, but we have a long way to go to catch up to that lucrative fourth quarter of 2023. It’s also worth noting, you know, as I mentioned, these deals are worth more. There were 21 deals in Q2 worth $1 billion or more, amounting to a combined 38 billion dollars.

That was basically 71% of the deal value in Q2. That’s up from 14 deals in Q1 worth a combined 23 billion dollars. The biggest deal in Q2 was Jiangsu Hengrui Medicine’s six billion dollar deal with Hercules CM Newco for three GLP-1 candidates.

There’s those GLP-1s again. Obesity seems to be where a lot of investors are putting their money. A lot of companies, pharma companies are doing deals in that space. That deal, that $6 billion deal was followed by a Novartis deal with Peptidream, $2.9 billion for macrocyclic peptides and an AC Immune-Takeda deal with $2.2 billion for an anti-amyloid beta Alzheimer’s vaccine. The industry is still working on a lot of things for Alzheimer’s.

Lee Landenberger: How about M&As?

Karen Carey: Yeah, M&As this year are more than double last year, reaching $67 billion in the first half vs. about $30 billion in 2023. But they were down in Q2, falling to about $17 billion vs. $50 billion in the first quarter. There were six M&As in Q2 worth $1 billion or more and, combined, they were worth $12.8 billion.

So about 75% of the total value for the quarter. So these really big M&As made up most of that M&A money. This is a significant drop from the first quarter when there were $10 billion plus deals worth $47 billion. Big M&As of Q2 were the acquisition by Novartis of monoclonal antibody pioneer Morphosis for $2.9 billion.

There was also Astrazeneca’s buyout of Fusion and Ono’s purchase of Deciphera, each for $2.4 billion, as well as Sanofi buying Inhibrx for $2.2 billion, the Genmab-Profoundbio M&A for $1.8 billion, and the Novo Nordisk-Cardior merger for $1.1 billion.

Lee Landenberger: How about layoffs?

Karen Carey: Yeah, they’re still happening, Lee. We’re at about 10,000 for the first half of 2024. We’ve seen Bolt, Tenaya, Takeda, Biomarin, Trevena and Bayer all cutting employees recently. According to EY, they wrote their Beyond Borders report recently. Well, there are some companies able to command a premium for assets right now, other biopharma companies continue to struggle. They called it the sugar-high of late 2020 and 2021 when there were high valuations and free money.

Now there’s what they call a quote unquote capital hangover and that has led to the layoffs. So it’s been a tough time for emerging biotechs.

Lee Landenberger: So when you step back and you look at the overall economy and how it’s performing and what it’s being guided by, how does this play into the financings and the deals landscape that we’ve just talked about?

Karen Carey: What’s interesting is how much biopharma is raised in the first quarter. That set a tone of enthusiasm for the year. So Q2 does feel a little disappointing in that regard. Some analysts or those in the financial industry have noted that investor sentiment is low right now, at least lower than it was last quarter.

Part of that could be because interest rates are being held high for a longer period of time than expected. The markets seem to be really influenced by interest rates. If you look at the XBI, it surged earlier this year, it was over 100, on signals that the economy was improving and there was a huge influx of follow-on offerings and pipe financings. But all three of those, the XBI, follow-ons and pipes, fell at the beginning of the second quarter in April. But again, just recently, everything rose in response to better inflation numbers. XBI actually ended Q2 45% above its 52 week low last October.

There is also a lot of cautious hope as well as uncertainty affecting the whole biopharma space right now.

One financial executive said he believes the market is positioned to perform well following the U.S. presidential election in November, no matter what the outcome is. I’ve also seen an analyst put out a note on which candidates or potential nominees would be the best for the biopharma industry. Almost all had good and bad points.

But EY in their Beyond Borders report said they expect financings, partnerships and M&As all to accelerate throughout the year. So there is some optimism moving forward.

Lee Landenberger: Yeah, great. Lynn, did you have any questions you wanted to ask Karen?

Lynn Yoffee: Karen, my takeaway here is that we’ve had a pretty healthy first half of the year. Nothing’s perfect, but for all of the small companies who are seeking financings out there to keep their innovation cycles moving forward, it sounds like there’s a sort of a red flag or at least a yellow flag of caution. Am I reading that right?

Karen Carey: Yeah, I think it’s what I had said earlier is that these companies that sort of have that solid science, those strong management teams, the known management teams, and really good assets, they’re doing okay.

But those companies that are waiting for that next inflection point, that next milestone before they can raise money, they’re spread pretty thin. So, you know, for those companies, they’re not really out of the woods yet. know, investors are being very selective of what companies they’re going to invest in.

But like I said, we are hearing that, you know, once we get past this U .S. presidential election, things might normalize a little more – investors might be more willing to take a chance with some of these emerging companies. It’s hard because we went through all that uncertainty through COVID and now we’re going through the uncertainty of the economy and the presidential election.

Lynn Yoffee: And I’m not sure what normalization really is, but still seems like there’s plenty of money coming through the pipeline. And most venture capitalists, despite the ups and downs of the economy, macro indications and influences, they always have always said, if the science is good, we’ll pay for it.

Karen Carey: Yep, it certainly seems that way. With these financings being as high as they are, the follow-ons are the ones that really blew me away in the first quarter. But, you know, there’s still a lot of money out there.

Lynn Yoffee: Terrific. We’ll see if the momentum continues.

Karen Carey: Yep, we will.

Lee Landenberger: Yeah, now we’d recommend also to listeners that they go to the BioWorld page and look at the snapshots tab. If you really want to drill down on some of these numbers that Karen’s talked about, there’s a lot of that in there. And we’ve had two roundups just in the last week or so about financings and deals. there’s lots of charts and further information in case you’re interested. So Karen, thanks again for your time and your insight. I really appreciate it.

Karen Carey: Thanks, Lee. Good to be here.

Lee Landenberger: Lynn, back to you.

Lynn Yoffee: That’s our show for today. As always, BioWorld will continue to keep you informed of all the most important scientific, clinical, regulatory, and business updates. We’re a daily news service covering the development of the most innovative human therapeutics designed to improve the human condition. If you need to track the development of drugs, turn to BioWorld.com. You can follow us on LinkedIn or X, and if you want to share news with us, please drop us an email to NewsDesk@Bioworld.com. Also, if you’re enjoying this podcast, don’t forget to subscribe via your favorite platform. Thank you for joining us today.

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