European biotechs navigating a new financing environment

There are two realities in biotechnology that have represented “ground truths” for decades. Firstly, developing drugs requires substantial amounts of cash and “regular stops at the super-charger”. Secondly, once you succeed in drug development, most of the payback is in the world’s largest and highest priced pharma market, the USA. How has the typically quite protracted financing journey of biotechnology companies changed in recent years?

Since 2023, with the IPO bottleneck extending and M&A activity resuming slowly, growth-stage as well as venture-stage companies are choosing to remain private for unprecedented periods of time. The good news is that the emergence of private equity continuation funds, more sizeable series C and D-rounds – such as the US$350m Eikon Therapeutics funding or the extension of Numab’s series C to CHF180m – as well as cross-over financings are providing an opportunity for corporates and their long-term investors to bridge the time to an attractive M&A-exit or successful IPO. For impatient early investors, the rapidly growing market for secondaries also provides a potential exit opportunity along the road. The extension of the financing journey is driven by a higher bar for exits. Public market investors and strategic buyers have turned their focus on high-quality, more mature assets positioned in attractive markets. For biotechs this generally means strong clinical data for novel approaches targeting therapeutic areas of interest. However, in disease areas such as obesity or neuroscience, capital markets investors tolerate a higher level of development risk as they are attracted by the enormous market potential and high unmet medical need in the major chronic disease areas of our super-aging western societies. In addition, European biopharmas now also need to adapt to changes taking place across the Atlantic.

The new administration’s plan to slap tariffs across multiple sectors – including pharma – could affect valuations of the wider pharma sector which is already re-assessing its global supply chains; European biotechs are less affected, but developers with late-stage assets will consider possible trade barriers in their decision-making in areas such as out-licensing and supply chain scale-up.

This article from Uli Kinzel, Partner Investment Banking Bryan Garnier, war originally published in European Biotechnology Magazine Spring 2025.