What are Biotech Investors Waiting For?

And what it means for hiring.

It’s been a tough couple of years for biotech, made especially difficult by the recent memory of pandemic-inspired investment that fostered biotech startups, created more jobs, and pushed salaries higher.  But it’s important to remember that even as bad as it feels today - particularly for jobseekers and earlier-stage founders looking for investment, Venture Capital (VC) investment is still more than double pre-pandemic levels.

Looking at 2024 in particular, the reality is better than expected.  Early predictions that biotech and life sciences VC and Private Equity deals would continue to fall in 2024 have been proven wrong.  With one quarter still to go, there has already been $7.4 billion invested in biotech startups in 2024, compared to 2023’s total of $7.8 billion raised.

Other signs that the market is making a comeback include the creation of new biotech-specific VC groups, like Regeneron’s venture arm or the new Goldman Sachs life sciences fund.  Arch Venture Partners are also raising a $3Billion fund for biotech.  What is changing is what is being invested in, when, and by whom.  

Who is Investing?

Biotech-specific VCs are still investing, but many are strapped for capital, with a lot of their money already tied up in investments made during the boom years of the pandemic that have yet to see an exit.  This is pushing more interest from crossover investors who see opportunities in companies actively working towards IPOs or who have strong potential for M&A deals in the near future.

Implications for Hiring:

Increased investment from crossover and hedge funds means more education around the realities of bringing therapies to market is required for investors who typically work in other industries, opening up opportunities for scientist consultants with a broad understanding of the whole landscape as well as those who are experts in a particular therapeutic area.  Biotech entrepreneurs who can communicate with layman investors, or can hire great science communicators to help them do so, will be more successful.

When is investment likely? 

Forecasts indicate that future investment will remain steady, or pick up slightly in 2025, but no one is suggesting that the market will return to pandemic-level highs.  Many consider 2020-2021 to have been bubble years, and that what we are seeing now is a leveling off, a return to market stasis.

Others say investing will pick up in 2025 after some of the bigger uncertainties get resolved. Many are waiting to see if the Fed will lower interest rates in September, which would lower the cost of capital.  Others are waiting for the outcome of the election which might impact federal Reserve policies.  The IPO market is also slowly returning, providing more exit opportunities for investors.  

This doesn’t mean that no one is investing at the moment, but it does mean that investors are favoring later-stage companies closer to potential payout events such as IPOs and M&A, representing shorter-term, lower-risk investments.   

Implications for Hiring:

In the short term, it will continue to be a tough market for job seekers.  Companies are still performing layoffs as they run out of runway while trying to raise the next rounds of funding which may not come in until the end of 2024 or early 2025.  

Look for companies in Phase III clinical trials, those who have FDA fast Track, Breakthrough Therapy, or Orphan Drug Status, as those are more likely to be near a deal or IPO, and might be hiring. This is even more likely if they are in Series C or D funding rounds. Openings in IND, regulatory, and QA/QC are common for this stage company.  Sales and business development professionals with science backgrounds are also in demand.

What is being invested In?

The AI trend has also come for biotech, particularly in the area of drug discovery.  As with most things, the mention of AI automatically brings with it the potential of exponential returns, despite a number of risks, including a lot of uncertainty around what those risks might be given that the tech is too new to know all the possible implications.  Still, the market size for AI-enabled drug discovery is predicted to increase by 32% in 2025.

Weight loss is another area where investors see the potential for large returns given the size of the market.  Companies working to tackle any part of this market are strong bets and attract a lot of investor interest, and competition.  Goldman Sachs predicts the GLP-1 market to exceed $100 Billion by 2030 and J.P. Morgan estimates that nearly 5% of the U.S. population will be on GLP-1 weight-loss prescriptions within the next 5 years.

Manufacturing of cell and gene therapies is another area of growth, primarily because it is still the biggest bottleneck to getting new drugs to market.  There is potential here for startups focused on improving the process/approaches/products to excite investors since it can help deliver results across all areas of biotech and pharma boosting the potential of their existing investments as well as any they make in the cell and gene therapy manufacturing space.  

Immunology and Cancer research also remain high on the list of frequently funded projects.  Both areas have large markets and have had some major breakthroughs such as targeted biologics in recent years.  In addition, drug prices remain high for these types of diseases which makes the potential return on investments more appealing to investors and pharmaceuticals.

Implications for Hiring:

Scientists who have expertise in these areas will continue to be in high demand.  Those who are able to combine their lab skills with data analysis and basic machine learning concepts will be particularly marketable, as AI and ML will begin to play a larger role in more than just drug discovery.  Scientists who have focused in the past on R&D alone would benefit from learning more about process development and manufacturing, even if they don’t plan on shifting roles themselves.  Understanding the big picture will allow for greater communication across teams and more successful outcomes overall, something investors, and therefore leadership will be watching for.

Conclusion

No one is expecting a return to pandemic-level funding, but the slowdown of 2022-2023 seems to be giving way to steady, stabilized investment.  Recovery of the job market will trail investment recovery by several months to a quarter, and likely won’t return to the days of competitive salary wars.  Layoffs and austerity measures, combined with advancements in AI that have boosted the productivity of many have shown many biotech’s they are capable of doing more with less.  When they do begin hiring again, it will be strategic, rather than a rush to fill seats.

Wondering how you can be more strategic with your hiring plan in preparation for your next round of funding?  Contact Elizabeth@Scismic.com for a free consultation.