BIO Finance Trends: Drug Developers Face Harsh Realities As Funding Constraints Continue

Both private and public biopharmaceutical companies are struggling to raise fresh capital for ongoing research and development programs, despite expectations earlier in 2025 that financial market conditions could potentially improve later this year after a rocky start. Dealmaking has become an important alternative to raising money from venture capital or stock market investors, but many companies still are struggling to remain afloat.

BIO International Convention attendees offered their perspective on the financial outlook and advice for companies wondering where their next funding rounds will come from. Unfortunately, few expect a near-term turnaround in investor confidence in the biopharma industry while uncertainty around key US policy issues exist, including the Trump Administration’s plans for most-favored nation (MFN) drug pricing and tariffs on pharma products as well as fluctuating staffing levels, leadership and policies at the Food and Drug Administration.

The number of biopharma companies that raised venture capital during the first quarter of 2025 dropped to 109 versus 132 during the same period in 2024, with the number of small VC rounds below $50m and the number of mega-rounds of $100m or more plummeting as well, according to data from Evaluate.

And the window for initial public offerings is essentially shut, with just six drug developer IPOs conducted in the US as of May and a seventh as of June 17 when Taiwanese urinary disease-focused Jyong Biotech raised $20m from an offering of 2.7 million shares at $7.50 each. Jyong previously sought up to $40m under a US IPO filing in 2023.

Be Prepared: Waiting For The IPO Window To Reopen

Ally Bridge Group managing partner and head of biotech private equity Andrew Lam said during a June 16 panel on preparing for an IPO that the best strategy for drug developers is to spend their time while the IPO window is closed making sure their companies are set up to meet the criteria of investors, meaning that their pipelines meet the needs of big pharma and other buyers looking for mergers and acquisitions.

Chirag Surti, executive director of global capital markets at Morgan Stanley, agreed during the same panel discussion that preparation for improving financial conditions is key. He noted that while drug developers may have to choose between M&A, a new venture capital round or an IPO, they should focus on aspects they can control – such as their value in the eyes of future investors – rather than aspects they cannot control, such as which potential buyers may opt to purchase them.

“What you can control is a couple of things,” Surti said. “One, your ability to market to private investors, so the crossover round [before an IPO], and if you haven’t diversified enough, that’s one where you can parallel track with the potential IPO. As you think about your IPO, that’s another track that you can control – the preparation, your ability to be able to have that equity story.” Being ready to execute a financing can create tension that leads to favorable terms from buyers, he noted.

Generate:Biomedicines, a private company using artificial intelligence and wet lab research to discover and develop biologics, is considering its fundraising options while preparing to take lead drug candidate GB-0895, an anti-TSLP antibody, into Phase III testing for asthma in October.

CEO Mike Nally explained in an interview with Scrip at BIO that Generate can begin the Phase III program with its $330m in cash on hand, but the company plans to raise more money – likely through another private funding round, because of the closed IPO window – to advance GB-0895 into Phase III in additional indications while advancing additional product candidates and further testing the potential of Generate’s technology platform.

“What we don’t want to do with TSLP is starve the rest of the platform,” Nally said. “We think we’re working on a transcendent technology that can really help us interrogate biology in distinctive ways and find really better answers for patients. And while TSLP is a huge advance in our mind, it’s just one medicine out of many that this technology could actually unlock.”

He noted that 25 institutional investors have backed Generate, including founding venture investor Flagship Pioneering, with about $800m invested in the company’s platform to date. What has changed since Generate raised its $370m series B round in 2021 and $273m series C in 2023 is that health care specialist investors have shifted their focus from platform companies to asset-specific opportunities, meaning firms with specific drug candidates advancing through clinical trials.

“And so having an asset [like GS-0895] with distinctive features in a strong competitive position creates a lot of interest from investors,” Nally said.

Investors Confirm Asset-Specific Preferences

Kevin Bitterman, partner at Atlas Venture, explained during a June 17 panel on Novartis’s partnership strategy that the VC firm has long-term, 10-year funds that invest in drug development across therapeutic areas from broad-based technology platform companies all the way to start-ups and growth-stage companies focused on specific drug candidates.

Nevertheless, Bitterman noted that “five or eight years ago it was all about platforms and the US-best technology. Today it’s all about capital-efficient assets and getting into clinical [proof-of-concept (POC)] as quickly as possible.” While Atlas aims “to build a strategy where we don’t have to pivot dramatically given what the macro environment is doing, of course we’re always second-guessing and thinking how we can improve our strategy, making minor course corrections.”

Nandita Shangari, managing director at RA Capital, said during the same panel discussion that her firm’s venture investment strategy is similar to Atlas’s, since RA is a long holder of biotech investments.

“When we come into companies and we build companies, we try to take them all the way through their life cycle, so for us it’s about really when we are investing in something to really think about how we can work through the clinical development plan,” Shangari said. “Is this something that’s going to be important to pharma?”

The biggest shift in RA’s early-stage investment strategy is that “we’re now starting to look at platforms slightly differently,” she said. “We’re looking at platforms as a means to get to an indication, so always being indication- and asset-first rather than building a platform for the sake of building a platform.”

TVM Capital Life Science always has focused its therapeutic investments on asset-specific start-ups, while its medtech portfolio companies are commercial or near-commercial opportunities. In both instances, the VC firm with offices in Montreal and Munich aims to support the companies until they are ready to be acquired – for therapeutics ventures, that’s after those companies have generated positive Phase II data for their drug candidates.

TVM managing partner Luc Marengère explained in an interview with Scrip that TVM raised its second fund, totaling $500m, in 2020 and has since invested all of that capital. Now the firm is in the process of wrapping up those investments, so it can pursue buyers for its assets, generate returns for the fund’s limited partners and raise a third fund.

“We have a number of companies that are either in an M&A process right now or will be towards the end of the year, early 2026,” Marengère said. “And this is how, of course, we generate the liquidity that is so lacking in the industry right now.”

He noted that companies with truly transformational product candidates will be able to raise funding, even in a tough fundraising environment, because big pharma always will have an appetite for novel medicines to fill their own R&D pipelines before legacy products face generic competitors.

“I’ve been doing venture capital for 29 years now,” Marengère said. “I’ve seen the crash of 9/11, I’ve seen the crash of 2008 financial crisis. Now we have a different kind of volatility and set of uncertainties. When such events happen, there is usually a race to the highest quality of deals that can be invested in.”

Waiting Out The Next Financeable Event

RNA editing specialist Korro Bio went public in a reverse merger with Frequency Therapeutics that closed in November 2023, concurrent with a $117m private investment in public equity (PIPE) financing. The company then grossed $70m from an April 2024 PIPE and received an upfront fee in September 2024 under a collaboration worth up to $530m with Novo Nordisk to discover and develop RNA editing medicines, with an initial focus on cardiometabolic diseases.

However, after taking lead drug candidate KRRO-110 into a Phase I/IIa clinical trial as a treatment for alpha 1 antitrypsin deficiency (AATD) and working on its earlier-stage programs, Korro ended the first quarter of 2025 with $139m in cash and announced plans to cut its workforce by 20%. While the company remains on track to report interim results from the REWRITE trial of KRRO-110 in AATD during the second half of 2025 and nominate its second development candidate this year, Korro said streamlined operations and job cuts will extend its cash runway into the first half of 2027.

Scrip spoke with Korro CEO Ram Aiyar at BIO about making the decision to trim the company’s operations and workforce to conserve cash. Aiyar cited prior “battle scars” from 23 years in biotech, including at his prior company, which struggled to finance its lead drug candidate despite positive Phase II results before it was acquired by a big pharma. Prior to Korro, he was co-founder, chief financial officer and chief business officer at Corvidia Therapeutics, which Novo Nordisk acquired for up to $2.1bn in 2020.

Reflecting on his experience at Corvidia, Aiyar said he started to see signs during the first quarter that Korro could face a similar financial scenario when it reports interim data for KRRO-110 later in 2025. The company also brought on its new chief scientific officer Loic Vincent, who had similar past experiences at prior biotech firms and identified areas in which Korro could streamline its operations to conserve cash.

“We had a discussion internally in terms of our data is going to be great [but] if the markets are not there, we’re going to be in a tough spot,” Aiyar said. This possibility prompted the company to narrow its focus to the AATD clinical program and its next development program.

“We’re going to nominate our second candidate that will be in the clinic sometime next year, so we have the ability to look at data potentially from that patient population for the second asset in early ’27,” Aiyar said. “You add all of those pieces together and it’s like, OK, we need to get sufficient capital to get to that second potential milestone so that we have multiple points in which we can raise capital.”

While he predicted that financial markets likely will improve in the second half of 2025 or early in 2026, Aiyar said, “we as a company need to plan for the worst-case scenario and mitigate risk. And then if everything goes well, then maybe we hire the same people back in what they were doing.”

Advice For Companies Going Forward

Creativity is key going forward for companies looking to raise money while the capital markets continue to offer limited funding options going forward. That means drug developers will have to make tough decisions about their R&D and workforce, like Korro Bio and several of its peers have done this year. Other companies may have to seek out alternative financial options, such as signing a partnership or acquisition deal or raising less cash in a new financing than was raised in a prior funding round.

“Rip off the Band-Aid for valuation,” Lam of Ally Bridge Group said during the IPO panel discussion. “If you’re overvalued, you either take it on the chin as a private company or you take it on the chin of the public company. Either way you have to take the medicine.”

Jakob Dupont, executive partner at Sofinnova Investments, advised companies during the IPO discussion to “sweat the fundamentals. Get your story right, get your differentiation right, get your trials right. Whatever your Achilles heel may be, de-risk that as much as possible,” before trying to raise money again.

[Editor’s Note: This article was updated on July 16, 2025 to correct the spelling of Luc Marengère’s name. Scrip regrets the error.]

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