Jonathan Norris Managing Director HSBC INNOVATION BANKING
How has the investment landscape evolved recently?
At the end of 2022, the investment market became unstable, and going public was difficult. 2023 became a downturn year. Investors were worried about valuations and primarily focused on their own portfolios. In 2024, investors began making new investments, but remained very cautious. Biopharma investment was up, but US$100 million+ mega rounds raised most of the capital. Smaller Series A and Series B companies struggled to find new investors, and that trend will likely continue. However, new investment activity picked up in January, especially in biopharma. How is investor confidence shaping funding trends?
In 2024, cautiousness bred conservatism. IPOs and M&A happened, but distributions to investors were down. Investors raise new funds by showing strong returns to their LPs, and when performance struggles, they slow investment pace to delay fundraising.
Mega rounds dominated in 2024, with 106 deals far surpassing 2023 totals. These rounds involved large syndicates, where investors not only wrote big checks but also reserved capital for future support. This approach minimized next-round risk but inflated post-money valuations, making future returns uncertain. Early-stage companies seeking smaller seed or Series A funding struggled to attract new investors.
Many companies that raised rounds in 2021–2022 turned to insider add-on rounds in 2023–2024. These rounds were smaller and created time pressure to hit value inflection points for future fundraising. In 2025, many of these insider rounds will come to a head. Companies will either bring in new investors or face consolidation and M&A, often under unfavorable terms. Early-stage companies raising smaller rounds will likely continue to face significant fundraising challenges. What will it take to restore optimism in the sector?
A partially open IPO market is crucial. If 20–30 venture-backed IPOs happen in 2025, it would be a positive signal. M&A will likely remain strong, but overvalued private companies may see lower-than-expected exit multiples.
Kimberly Young Industry Head, Life Sciences CITI COMMERCIAL BANK
What were the main recent achievements from Citi Commercial Bank?
Citi Commercial Bank has continued to support emerging healthcare and life sciences companies across the US and internationally, leveraging our extensive network across the organization to meet their evolving needs. On the transaction side, one highlight to note was a US$100 million working capital facility we closed late last year for a pre-profit, commercial-stage biopharmaceutical company—delivering cost-effective financing and enhancing their cash conversion cycle. It reflected our unique ability to serve clients throughout their lifecycle, from early-stage biotech to large healthcare corporates. How is the changing regulatory environment affecting the life sciences industry?
The life sciences industry is navigating a complex landscape marked by regulatory shifts and market dynamics. Recent leadership changes and announced staffing reductions within HHS and specifically the FDA, raised concerns about the evaluation of drug applications and timelines. NIH budget cuts are raising concern for the academic research ecosystem – long a source of early-stage innovation—and prompt urgent questions about who will fill the funding gap.
Recent tariff exemptions offer short-term relief for pharmaceuticals, but it remains unclear if other healthcare subsectors will benefit similarly. Further uncertainty surrounds potential US drug pricing reforms, which remain a key political focus. Altogether, these developments underscore a complex and evolving environment, with critical implications for stakeholders across the healthcare and life sciences ecosystem. Will venture financing in life sciences remain resilient despite economic volatility?
Venture financing in healthcare and life sciences is expected to be more selective in 2025. The funding model has evolved, with a notable shift away from early-stage financing, instead, we are seeing fewer but larger financings, as investors prioritize later-stage assets that have undergone significant de-risking. With public market challenges and economic uncertainty, private companies with differentiated science, strong data, and clear paths to commercialization will be best positioned to secure capital.