Emerging biotech

Stock market whiplash is dampening hopes for a comeback year in the biotech arena. 

Roughly 25% of biotech stock values sank below their cash holdings this year amid sudden changes to U.S. trade policy, Bloomberg reported. 

In an economic situation that’s shifting by the day, “the only thing that's certain is uncertainty,” said David Crean, managing partner at M&A consulting firm Cardiff Advisory.

At the beginning of the year, pharma M&A was expected to rise and the biotech IPO market appeared steady. Now, the biotech space has been roiled by several abrupt changes stemming from new Trump administration policies.

When the FDA’s Peter Marks was forced out of the agency, biotech stocks sunk. The former director of the agency’s Center for Biologics Evaluation and Research played a key role in the development of the COVID-19 vaccines and was seen as an ally among vaccine makers that are now up against potential changes from HHS’s new Secretary, Robert F. Kennedy Jr. — a known vaccine skeptic. 

Dramatic staff reductions at the nation’s health agencies injected more uncertainty into the industry. And then came tariffs. 

“Biotech stocks have experienced heightened volatility in recent weeks due to the tariffs pressures and just broader market uncertainty,” Crean said. “We're also on the heels of everything that went down with [job cuts at] HHS, FDA, NIH, CDC. It’s just a lot of chaos.”

Amid the whirlwind and the market’s loss of value, biotech IPOs are likely to slow. 

“When you have turmoil in the public markets, it creates a headwind for the investors and for the portfolio companies to go public, and for the limited partners to get return on their investment,” Crean said.

As the consequences of the emerging economic policies play out on public markets, private markets are in the line of fire.

“Everything that's going on the public market — water goes downhill and it spills off into the private capital markets,” Crean said.

The biotech market could still pick up later this year as the storm from the new policies settles. But companies waiting to launch an IPO and investors looking to buy will likely sit on their hands until the market returns to normal — a process that could take time, Crean said.

“There's just more of a cautiousness for the remaining part of 2025,” Crean said. “I don't think there's going to be a broad opening up of the IPO market until probably later this year, probably [in] the fourth quarter. There's a ton of companies in the IPO queue — they have their S-1 [filing] ready to go and be filed. It's all timing based.”

While IPOs hang in the balance, other factors could keep the dealmaking environment alive, regardless of the stock market’s ongoing turmoil. 

Dealmaking drivers

M&A kicked off 2025 on a high note with a handful of major deals announced at the J.P. Morgan Healthcare Conference in San Francisco, including J&J’s $14.6 billion acquisition of psychiatric drug developer Intra-Cellular Therapies. The conference is often seen as a barometer of M&A activity for the coming year, and the smattering of deals announced in January had investors “pumped,” according to Crean.

But by March, it became clear that drugmakers were still holding out.

“[M&A] started off as gangbusters in January, but it's been relatively quiet and muted up through April,” Crean said.

Big Pharma faces pressures that may force its hand this year. Looming patent cliffs are creating revenue gaps companies need to fill, and acquisition or licensing deals with biotechs that bolster their pipelines are still the go-to strategy. Some large pharmas are also sitting on cash in their balance sheets that “needs to be put to good use,” according to Crean.

“They're going to have to be very aggressive and dip into their balance sheet to buy assets, and particularly late-stage assets, to fill that portfolio gap. There's no other way of doing it,” Crean said.

Crean also expects to see bigger deals, or “transformative M&A,” later in the year, due to the size of the revenue losses ahead for some companies. Smaller deals won’t be enough. 

Even so, J&J’s Intra-Cellular deal is the largest this year by far, and few others crossed the billion-dollar threshold in the first quarter. Another acquisition announced during JPM, GSK’s $1 billion purchase of cancer drugmaker IDRx, is among the biggest deals of the year. 

“Maybe it's a little bit of a wait-and-see game, but [pharmas] can only wait so long,” Crean said.

One therapeutic area —cardiometabolic diseases — has proven to be a sought-after target. Most recently, Novo Nordisk announced it would spend up to $1.8 billion to license an early-stage obesity asset from China-based United Biotechnology. Revenue from Novo’s blockbuster GLP-1 obesity and diabetes medications are scheduled to get squeezed in 2027 after being included in the second round of drug price negotiations from CMS.

For now, Crean says the biotech industry should “remain calm and have patience.”

“This too shall pass,” he said.

After facing market headwinds in recent years, the biopharma industry finally had some wind at its back in 2024. Jumps in funding and R&D expenditures as well as a continued shift in innovation toward emerging biopharma companies helped fuel the resurgence, according to a new report from the IQVIA Institute for Human Data Science.

But a shifting regulatory landscape, economic uncertainties related to trade policies and cuts to federal research funding still raise questions about the future of R&D. 

“There is a high level of uncertainty about what is going on and what things will look like when they settle down in six or 12 months,” Murray Aitken, executive director of the IQVIA Institute for Human Data Science, said in an email. “Some of the announced changes have been reversed and there is more change to come. So, it’s difficult at this time to predict what will have the biggest impact.”

Funding on the rise

One of the positive trends in 2024 was an increase in biopharma funding levels bolstered by IPOs, follow-on funding, and public and private sources. 

“Excluding the 2020 and 2021 heights seen during the pandemic, funding reached a 10-year high of $102 billion in 2024 — a substantial increase on the 2023 figure of $71 billion,” the report stated. 

Whether that will continue in 2025 remains to be seen. 

“When there is uncertainty, decisions tend to take longer, and this may play out in terms of funding and investment,” Aitken said. “This may have an impact, especially on early-stage companies, and is likely to have a near-term effect, given the amount of uncertainty about tariffs and the broader macro-economy.”

Trends in clinical trials

The number of newly begun clinical trials rose slightly in 2024, following declines in 2022 and 2023. Fueling the trend was an uptick in oncology and obesity trials. U.S. companies made up the bulk of trial starts, contributing to 35% overall. Emerging biopharma companies also played a role, accounting for 63% of new trials in 2024, compared with trials run by bigger pharma companies, which accounted for 26%.

The number of remote, virtual or decentralized clinical trials declined closer to pre-pandemic levels, although these strategies will likely still be used when appropriate, according to IQVIA.

Many companies are now testing novel drug mechanisms in oncology, with antibody-drug conjugates, cell and gene therapies, and multi-specific antibodies making up 35% of new trials in 2024. Drug companies only launched 65 “novel active substances” globally in 2024, down from 80 in 2023 but still above pre-pandemic numbers, IQVIA said. Among the approvals last year were several therapeutic breakthroughs.

“The cohort of launches in 2024 included the first new mechanism of action in schizophrenia in over 30 years, the first therapy of metabolic dysfunction associated steatohepatitis, four treatments for rare neurological diseases and seven non-oncology hematology drugs — including two gene therapies,” stated the report.  

A drop in R&D deals

Not all news in 2024 was favorable. IQVIA noted a continued drop in R&D deals between pharma companies that began in 2022. 

“More than half of the 1,016 deals made in 2024 were between emerging biopharma companies, with the majority of the remainder involving … deals with larger companies. Partnerships between larger companies remained relatively rare, accounting for just over 1 in 10 R&D deals,” the report found. 

Deals with Chinese companies continued to rise in importance in 2024, with most deals involving a U.S. or European partner that acquired or in-licensed R&D assets from China. Large pharma company R&D expenditures rose from $163 billion to $190 billion from 2023 to 2024.

M&A was also down, though with some silver linings. While the total value of disclosed deals dropped, the median deal value shot up from $153 million in 2023 to $405 million in 2024. This number was inflated by several multibillion-dollar deals, including AbbVie’s $9 billion acquisition of Cerevel Therapeutics and $10 billion ImmunoGen deal, and Gilead Sciences’ $4.3 billion Cymabay Therapeutics buy. 

In the years ahead, IQVIA sees no end in sight for one key trend noted in the report: the use of AI in R&D. Notably, AI companies sponsored or collaborated on at least 35 new trials a year from 2022 to 2024, according to the report. And AI/machine learning deals totaled nearly $10 billion last year.

Looking forward 

While uncertainty still clouds the forecast, there are some potential bright spots for the industry, Aitken said. For one, HHS officials are focused on preventing chronic illnesses in the U.S. and also want to streamline regulatory reviews and actions, particularly in rare diseases. 

Aitken said the industry could also benefit from an executive action on April 15 that recommended changes to the Inflation Reduction Act, including one that the pharma industry opposed for disproportionately targeting small-molecule drugs.

Overall, the climate may still be favorable for R&D, driven by two main factors — the unmet medical needs of patients and scientific discoveries that help create those solutions, Aitken said. 

“The momentum around scientific discovery is strong and unmet needs are only increasing,” he said.  

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Introduction

Integrated solutions can be considered as an option for sponsor companies to improve the efficiency of drug development by streamlining the transition from early development stages to the clinic. They also help provide timely clinical materials to keep study timelines and budgets on track through advance planning and parallel processing. However, the benefits of integrating development disciplines are often overlooked by smaller innovators who are reliant on short-term success and may have a different view of risks and benefits compared to larger organizations.

Improving Outcomes Before Entering Phase 1

In early development, Good Manufacturing Practice (GMP) requirements must be balanced with the data collection process, where methods are prone to higher variability. Partnering with a CDMO that has deep expertise from working with challenging molecules and is staffed with experts in recognizing issues hidden in limited data sets allows for the timely identification or prediction of critical issues as soon as they become apparent. An integrated CDMO enables customers to benefit from their experience of handling a wide variety of molecules across a multitude of projects. While GMP requirements and data collection are important considerations in early development, there are other factors that can also impact the success of a project, such as the drug's mechanism of action and target location. Understanding this is vital as this knowledge allows the CDMO to transition from API to a patient-friendly drug product by optimizing the formulation for delivery to the target site and maximizing the therapeutic effect of the drug.

Another important factor to consider in early drug development is the structure and polymorphic form of the chosen molecule (Figure 1). A CDMO with deep expertise in this area can help to mitigate any liabilities by advising clients on the selection of the most appropriate solid form for their API and identifying any changes to the solid state of the API that could impact quality or safety. For example, improvement of purity that typically happens after GLP toxicology studies, and before Phase 2 can have a serious negative effect on solubility. If solubility has been selected as a critical factor, Catalent’s approach recommends rechecking solubility of new batches of API, especially if there has been a process or site change.

Small companies often set program timelines without considering the specific characteristics of the API, which can lead to development teams having to find and mitigate issues along the way, often with minimal data and without extra resources or time. Unfortunately, this minimization of development work means that many molecules have challenges that do not become apparent until after Phase 1. As scientific issues accumulate and change the risk/benefit profile, pharmaceutical companies must communicate and respond quickly. Unfortunately, many companies are not agile enough in their response, leading to further delays.

While small companies face financial pressure to quickly get to Phase 1 proof of concept and unlock more funding, there is a temptation to conserve efforts to reduce cash burn. This could include avoiding the latter stages of API development and relying on formulation approaches such as spray-dried dispersion or lipid formulation to overcome any challenges that may surface. However, this increases the risk that the API may prove to be unsuitable, or that API development will still be taking place during Phase 2, which can disrupt future clinical supply. An integrated approach ensures a comprehensive evaluation, preventing isolated decision-making and facilitating early issue identification and management.

A significant hurdle in Phase 1 is the failure to achieve desired outcomes during dose escalation, due in part to poor bioavailability of many new molecular entities (NMEs)1 . The traditional “powder in bottle” approach is unlikely to achieve targeted efficacy for new oral dose molecules in the majority of cases, highlighting the importance of considering bioavailability early in development. Adopting an integrated approach that evaluates bioavailability-enhancing technologies in parallel can mitigate these risks, enhancing the probability of achieving targeted drug exposure and efficacy.

Reducing Timelines in Early Development: Expertise & Communication

Advanced formulation expertise is required to reduce risk early on and achieve a viable formulation to increase success rates during dose escalation toxicity in Phase 1. The fastest and most efficient way to achieve a viable formulation is to conduct feasibility studies on relevant formulation options in parallel, and select the optimized approach based on animal pharmacokinetic (PK) data.

Problems with solubility, first pass loss, efflux and gut metabolism can complicate PK evaluation and are usually impossible to separate without the help of physiologically based pharmacokinetic modeling (PBPK) expertise. PBPK modeling can be applied at any time through the process, and usually becomes both more sophisticated as the amount of data increases, and more useful as the molecule migrates through species into human studies.

Good communication between the drug developer’s and the CDMO’s project teams is key to managing the evolution of the dosage form, while meeting project technical quality and timeline requirements. It is beneficial to engage quality assurance and manufacturing experts to identify any difficulties in how the interaction between the CDMO and the clinical research organization will work and set up the correct and appropriate quality agreements. However, the project scope goes beyond the scientific approach in early development and extends into the integrated “one-partner” approach to downstream clinical manufacture, packaging, and clinical supply.

Traditional Linear Processes for Early Drug Development & Clinical Supply

In pharmaceutical companies where in-house resources are limited, the drug development timeline is typically managed in a linear fashion (i.e., step-by-step) when it comes to the order in which tasks are completed. The process begins with development and manufacturing, which includes identifying the most promising candidate to progress through to dose form development. Once ready for the clinic, the study drug is then manufactured, packaged, and distributed to trial sites. The non-integrated linear approach is a short-term strategy that focuses only on the next milestone. In this approach, pharmaceutical companies outsource key project tasks to multiple CDMOs in sequence, completing one step at a time before handing over to the next (as shown in Figure 2).

An Integrated Approach: Simplifying & Streamlining Drug Development

Rather than following a linear timeline in drug development, an integrated approach focuses on the long-term horizon by having certain development and supply tasks operating in parallel (i.e., overlapping) with one another. This builds up better knowledge and understanding of the product from its inception (Figure 3) and involves planning with the end in mind. Having earlier access to critical information allows activities with longer lead times to begin sooner, rather than having to wait for previous tasks to be completed before moving on. For example, time can be saved by initiating packaging design while still in the early development stage. This approach also builds a buffer into the schedule, allowing teams to effectively plan, mitigate risks, and avoid potential delays.

For example, Catalent uses an integrated approach to help with three key issues common to many sponsors: accelerating timelines, improving communication between all parties, and improving project outcomes. Various teams within the CDMO operate together under one quality system and one agreement, using their combined experience to anticipate future needs, improve communication across the entire project, and reduce transition periods. This results in streamlined program management and identifying opportunities for parallel processing. Clinical supply planning and scheduling can begin sooner, and the process increases flexibility to ensure that formulation development flows seamlessly into clinical supply services.

Summary

An integrated approach to drug development which seeks to undertake formulation development and clinical trial supply activities in parallel can reduce the time to clinic, and can be used by all pharmaceutical companies, especially smaller ones who may have fewer resources and/or limited experience. Enlisting the help of an integrated CDMO partner and applying GMP requirements, best scientific practice, as well as technology and advanced formulation expertise from the beginning can help mitigate risk and improve project outcomes. Additionally, a CDMO that has clinical supply and logistics services can provide better transitions from early development into Phase 1 and beyond, as the teams have open lines of communication and are better equipped with information early on. This allows for the development of future plans well in advance. Overall, integrated development is a strategic approach to drug development that can help small pharma companies to achieve their goals more efficiently and effectively.

For more information, please watch the webinar Integrated Clinical Development and SupplyBreaking Down the Early-Development Journey of a Small Molecule.

About Catalent

Catalent is a global leader in enabling pharma, biotech, and consumer health partners to optimize product development, launch, and full life-cycle supply for patients. Catalent’s integrated solutions aid in accelerating molecules from candidate to clinic and beyond.

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Drugmakers looking for an edge in the booming obesity market aren’t just hunting for the next potential blockbuster. Talent is also a hot commodity, and one European biotech with mid- and late-stage obesity assets bagged a big name in the field last month.

Utpal Singh, who calls himself a “drug hunter” on LinkedIn, has leapt from Eli Lilly’s small molecule business into the chief scientific officer role at Zealand Pharma, a peptide-focused biotech with several obesity candidates in the works. 

Zealand grabbed headlines mid-March when it announced a development and commercialization deal with Roche worth up to $5.3 billion to advance its phase 2 amylin analog obesity shot petrelintide that’s being tested alone and in combination with Roche’s obesity and diabetes candidate CT-388. The partnership marked pharma’s biggest obesity deal to date and shot Zealand into the limelight.

At Lilly, Singh specialized in strategic partnerships, which will be key in Zealand’s obesity plans. Zealand isn’t the only upstart that’s lured leadership from the obesity market rivals Lilly and Novo Nordisk. Its partner Roche also pulled a senior leader from Novo shortly before announcing its deal with Zealand.

Singh, who was also a scientist at Merck & Co., has moved across the pond to join Zealand at a time of growth. In addition to bringing Singh on board, the biotech announced a new chief development officer — Steven Johnson, a former UCB exec — this week. 

Zealand is advancing four obesity assets, including a phase 3 glucagon/GLP-1 receptor dual agonist, survodutide, it’s developing with Boehringer Ingelheim, as well as candidates for congenital hyperinsulinism, short bowel syndrome and chronic inflammation. Most recently, the company completed enrollment for all its phase 3 obesity trials for survodutide. The company is expecting topline trial readouts early next year for survodutide and petrelintide. 

But it hasn’t been all smooth sailing for the biotech. In December, the FDA rejected its new drug application for glepaglutide, a long-acting GLP-2 analog for short bowel syndrome. Zealand is still working on a path toward approval for the drug and plans to initiate a new phase 3 trial this year to support resubmission.

As Zealand inches closer to bringing a drug to market, Singh is settling into his new role leading the company’s pipeline strategy and leveraging his strategic expertise.

Here, Singh explains how he’s applying his Big Pharma drug development experience at a small biotech, his leadership style and the promise of peptide drugs.

This interview has been edited for brevity and style.

PHARMAVOICE: What are some of the cultural differences coming from Big Pharma in the U.S. to Zealand Pharma in Copenhagen?

UTPAL SINGH: From Lilly to Zealand, there's more overlap than there are differences. There's a lot of can-do attitude. Certainly, from a disease state standpoint, there's a lot of overlap, so the scientific acumen is also very similar. The one thing I've noticed here… [is] there's a level of scrappiness I've seen at Zealand that's impressive. [And] for an organization this size to have several phase 3 programs and such a highly-valued phase 2 program that will probably begin phase 3 next year — it's pretty impressive. There's a line of sight to several potential launches [and that] … speaks to how resourceful it is.

Is there a level of scrappiness to your role as well?

There is. The element I would probably [give] myself is resilience. My story [begins by] coming to the U.S. [from India] when I was 8 years old, not being able to speak English, and my brother and I were the only two brown kids in the entire school at the time. There's a level of resilience you learn as a first-generation immigrant. I see that here at Zealand, as well. Zealand went through some hard times, but they're resilient. They stuck with it. And right now, we're at a pretty significant pivotal point from a growth standpoint. 

Shortly before your position was announced, Zealand made a $5 billion development deal with Roche. What did that deal tell you about the biotech’s pipeline?

Zealand was definitely on my map. Even before the Roche deal, I would say [CEO] Adam [Steensburg] was really in the forefront of saying, as much excitement as there is for GLP-1s, there are some issues around the tolerability. I don't think he gets enough credit for that, but he was one of the earlier folks who put a line in the sand to say GLP-1s are good, but they're not the answer long term. What Roche brings is more confidence that this value will be realized with the scale that [they] can bring to bear, from manufacturing [to] commercial, etc. 

Where are we in the scientific timeline for peptide drugs?

I don't think there's been a better time to be in discovery. If you think about the things you could do with peptides today, whether it's different forms of delivery, whether it's using it to target different tissues, whether it's a delivery vehicle, there are a lot of things you could do with peptides today that 10-15 years ago was not possible, and very few people thought was feasible. The question for Zealand is going to be: How much of that do we need to own? And how much of that do we need to partner? 

How have you shifted your R&D strategies from Big Pharma to a much smaller organization?

You have to think about what your differentiation is going to be. [Zealand] will never have the scale that Novo, Merck, Roche [or] Lilly has, right? We don't have $50 billion of revenue at our disposal to play with, so … you really have to play to your strengths. Coming from Lilly to here I'm focusing on two or three things. No. 1, it starts with the people. We already have a very strong and talented foundation, but … there's a global war for talent, and you're going to either win or lose based on the people and the teams … that you have. 

No. 2 is recognizing that there's not as much risk we can take in our portfolio as a company the size of Novo or Lilly and others have. So we need to be very crisp in our decision making. The targets we start in discovery have to have a clear line to the clinical hypotheses we want to test and where that's going to fit. And ultimately, I think where Zealand can win is on speed. When you're a small, nimble organization, you can make decisions faster. So my focus right now is going to be on making sure that we pick the right targets, we continue to attract top talent and build the talent that we have internally, and compete at a global level. If you pick the right biology and you pick the right people, magic happens.

What would you say is your leadership style?

I've learned a lot about leadership through the eyes of my daughter in the last several years. She hates it when I say that. I'll not stop saying it because it's true, but at least now that I'm in a different country, she won't learn about it. But what really defines me [as a leader] is vulnerability. I don't take myself too seriously. I'm very clear to admit what I know and what I don't know, and I don't mind asking the stupid questions. 

If the recent crop of companies emerging from stealth is any indication, innovators are doubling down on opportunities to join the juggernaut weight loss market while exploring fresh opportunities in immuno-oncology and pain management. Investors appear eager to back their efforts, pouring hundreds of millions into these new initiatives. The flow of capital reflects overall market trends. 

Global spending on cancer medicine is predicted to increase from $223 billion in 2023 to $409 billion by 2028, for example.

But many of these biotech hopefuls will also face intense competition for market share, particularly in weight loss, where the pipeline contains more than 150 clinical-stage assets, including several in phase 3, according to a recent IQVIA report. 

“As these assets progress through the pipeline, innovators will need to navigate an increasingly crowded field and seek differentiation on multiple dimensions, including efficacy, tolerability, convenience, durability and quality of weight loss that distinguishes between fat vs. lean mass,” the report states.

Here’s a look at some of the most recent startups to emerge from stealth and the innovations they’re bringing to the table. 

The obesity race

Three new startups are advancing drugs that could earn them a cut of the blockbuster GLP-1 market, now on track to become the best-selling drug class in history.

Helicore Biopharma announced itself in January, backed by $65 million in series A financing. The company is looking to build on the success of GLP-1 drugs by adding a second target — the glucose-dependent insulinotropic polypeptide (GIP) receptor — and creating a dual action approach that researchers believe could enhance weight loss. Helicore is also betting that the combination will help it sidestep one of the main drawbacks of GLP-1 drugs: muscle wasting. In preclinical studies, its lead asset, HCR-188, appeared to preferentially target fat over muscle. 

Kailera Therapeutics came out of stealth last year with more than $400 million in investor dollars. It is also focusing on the GIP pathway, with a suite of four clinical and preclinical drugs for weight loss and metabolic conditions that the company acquired from Jiangsu Hengrui Pharmaceuticals. Its lead injectable medication, a GLP-1/GIP combination, is now in phase 2 trials for both obesity and type 2 diabetes. 

Metsera also arrived on the obesity scene last year and hopes to innovate itself ahead of the competition with a portfolio of oral and injectable therapies, including GLP-1s, drugs using alternative non-incretin pathways and combination approaches. The company’s portfolio has attracted investors, garnering $290 million in initial funding and another $215 million in November. Phase 2a results show its lead product was well tolerated and patients in a 12-week trial saw as much as a 20% reduction in their body mass. The study also supported the feasibility of a monthly dosing schedule, which could give it a competitive advantage over current weekly GLP-1 shots.

Rising immuno-oncology contenders

Leveraging the immune system to treat cancers continues to be a major focus for drug developers. 

Ottimo Pharma, headed by former Seagan CEO David Epstein, threw its hat into that market in October with its investigational drug, jankistomig, a PD1-VEGFR2 bifunctional antibody that it hopes can rival Merck’s blockbuster checkpoint inhibitor Keytruda. The drug is a checkpoint inhibitor that also aims to inhibit angiogenesis, the formation of blood vessels that cancers need to grow and spread. Ottimo has been testing the molecule in preclinical trials for the past three years and is looking to file an IND at the end of 2025.

Nuntius Therapeutics also emerged from stealth last year and announced a partnership with Taiho Pharmaceutical to develop mRNA-based cancer immunotherapies. Taiho will use Nuntius’s unique mRNA delivery platform, which helps avoid some of the drawbacks of current mRNA delivery technologies. Its cell-specific peptide dendrimer- and lipid-based nanocarriers appear less likely to trigger an immune reaction and may be more effective at reaching targets outside the liver. The company is also developing mRNA therapeutics that target cancers, and lung and neurodegenerative diseases.

The pain push

In the wake of the opioid epidemic, many companies, including Tris Pharma, SiteOne Therapeutics and Latigo Biotherapeutics, have strived to develop safer pain treatment alternatives. 

The field got a boost when Vertex scored a win in January with its first-in-class non-opioid painkiller Journavx, which analysts predict could top $10 billion in sales. 

And Maxoma, another newcomer advancing an option to manage pain without the addiction risks, came on the scene in February. The company is developing a non-opioid, non-NSAID oral therapy to tackle both acute and chronic pain. The primary ingredient in its candidate is nefopam, a prescription medication already used for pain in some European countries and East Asia. The company announced good safety results from a phase 1 trial, and hopes the drug could eventually become the first triple monoamine re-uptake inhibitor approved for acute pain in the U.S.

When times are tight, creative approaches reign supreme. For the biotech industry, which has seen several years of difficult financing, smaller companies have found it especially challenging to gain the runway they need to carry drug candidates through the clinic.

While IPOs have underperformed and larger venture capital firms are looking for safer bets, companies like Diakonos Oncology, a small biotech with a phase 2-ready dendritic cell vaccine in glioblastoma, are shaking things up, according to COO and president Jay Hartenbach.

“It’s been frustrating because you want people to give you the time of day, but at the same time, they’re saying, ‘Once you get a lead, then we’re interested,’” Hartenbach said. “It’s a chicken-and-egg kind of scenario, and we’re one of many companies trying to get creative.”

After considering a series A round last year, Diakonos encountered “a lack of reception” from traditional, biotech-focused VCs. Instead, the company “pivoted to a less traditional route.” For instance, Diakonos opted for a type of financing called a simple agreement for future equity, known as a SAFE round, with family offices outside of the more common biotech investors. SAFE financing defers valuation discussions and equity issuance until a later time.

Unconventional investors like family offices and high-net-worth individuals approach the industry with a different lens than traditional VCs by embracing higher-risk, higher-reward situations, Hartenbach said. That mindset is critical for biotechs with pipelines that skew toward challenging modalities and underserved indications, he said, pointing to Diakonos’ focus on the difficult area of dendritic cell therapy for a particularly tough-to-treat brain cancer.

“Anything that’s not trying to build on a 10% or 20% improvement but a fundamentally new approach is going to have to rely on this approach,” Hartenbach said. “The non-traditional groups are going to allow more difficult, unmet indications to get R&D funding that may not have otherwise been done.”

Here, Hartenbach speaks about the importance of non-traditional investors in biotech as competition for funding remains as cut-throat as ever. 

This interview has been edited for brevity and style.

PHARMAVOICE: What’s driving this shift toward more non-conventional biotech investing?

JAY HARTENBACH: Traditional pharma is doing less and less R&D, and it’s falling more on the smaller biotechs to get to the clinical proof of concept or into later clinical phases, and so it requires different types of funding with M&A or out-licensing being pushed down the road. Who’s going to fill that gap? With biotech, the industry has been having a really hard time in the last three to four years, but there’s still innovation happening. And so if the VCs are more reticent, then that’s where the opportunity comes in — for us, that’s specifically driven by what we’re doing.

We have a drug that’s a dendritic cell therapy with our lead asset in glioblastoma. When you talk to a traditional VC, they’ll say glioblastoma hasn’t worked, that there’ve been 60 or so failures in a row, and that they’ve lost a lot of money. And so even though there’s a growing interest in cell therapy, a lot of the VCs who put a fair amount of money early on in cell therapy lost money. With the VCs less interested, we’re working with a variety of family offices in the SAFE round.

It sounds as if non-traditional investors like family offices help get cutting-edge medicines through the clinical process. Can you explain why they’re willing to take that risk over some of the more traditional VCs?

Dendritic cells historically haven’t worked, so if you’re a traditional biotech VC, you’re looking at different opportunities — a lot of what makes them successful isn’t just what they say yes to, but also what they’re saying no to. And so the market contracts around things that have had a poor track record or, more importantly, poor investment results, whether that’s the indication or the modality. It becomes very hard to justify taking another bet.

But with high-net-worth individuals or family offices, they’re willing to be more objective with the data without the bias of a track record for something like glioblastoma. They’re very savvy, and with that risk comes a financial return they’re very interested in — that’s why they have the money they have. On top of that, they’re interested in and able to prioritize the humanitarian reason more than a professional investor. They see some of these investments as [being] for the greater good.

How do those strategies differ?

A non-traditional investor doesn’t necessarily have a team of experts with Ph.D.s to interrogate the science or MDs to get into the weeds on clinical results. In some ways, the due diligence is based more on how the management is portraying the deal, and so there’s a little more trust. But at the same time, they still do an extensive amount of due diligence, but not as uniformly. For high-net-worth investors or family offices, the investment horizon is substantial. They tend to be less focused on specific timelines and more focused on potential return from a specific asset or indication.

How is this shaping the biotech industry?

Let’s look at what would happen if we didn’t have participation from non-traditional investors — you’d see a more measured amount of success and innovation through a more conservative approach. The field will certainly move forward but may not make these giant leaps, especially in large unmet clinical needs. High-net-worth individuals and family offices have often been willing to get involved in early-stage or preclinical work, but seeing them starting to participate in a phase 2 registration-enabling trial isn’t as common. And that allows potential leaps forward in riskier, cutting-edge technology.

The biotech sector has had a tough time raising capital in recent years. Could this shift toward non-traditional investors pump some fuel into that?

I think so. If you look at the pendulum, companies going public in 2020 or so were doing some very large transactions or raises on three or four patients or even really promising preclinical data — that’s just not sustainable. So the contraction has actually been a good thing for the industry at large by putting better focus on the things that have to happen. When you know the money is not unlimited, you start thinking about how you can do your trial design or work with trial sites to get the most bang for your buck. That increases discipline, and for companies that are really moving the needle, it filters out the noise.

After a few years of booming interest in AI platforms, the rubber has hit the road. Now, the market is watching closely to see if drugs discovered with the new tech will pan out in the clinic — and are still worth backing. 

Signs have been good so far for Insilico Medicine’s lead candidate, which it claims is the “first end-to-end generative AI-assisted drug.” The company announced positive topline results for a phase 2 study of the idiopathic pulmonary fibrosis treatment in November, which Insilico said demonstrated “encouraging clinical efficacy” by improving lung function for all 12 weeks of the trial. Insilico now plans to charge ahead into pivotal trials with the drug that was recently rechristened from ISM001-055 to rentosertib.

But results have been murkier for other AI front runners.

Recursion Pharmaceuticals revealed mid-stage data for its candidate in September that demonstrated safety but only showed a “trend” toward efficacy endpoints. 

Some industry watchdogs suggested the drug may be doomed to fail for the tough-to-treat neurovascular condition called cerebral cavernous malformation. And Recursion, which has built a diversified oncology and rare disease pipeline using an AI platform leveraging “one of the world’s largest proprietary biological and chemical datasets,” has been bolstering its clinical prospects in other directions.

Last year, Recursion picked up Exscientia, an AI drug discovery company facing its own challenges after losing a partnership with Bayer, in an acquisition worth nearly $700 million.

Have these industry shifts and uneven clinical results dulled the market’s appetite for AI drug discovery companies? 

While the COVID-19 market boom has cooled broadly across biotech, a recent major funding round for a Google-backed AI startup indicates there’s still momentum.

In fact, 71% of venture capital investments across U.S. industries in the first quarter of 2025 were tied to AI, according to PitchBook.

And in pharma, which has long been hampered by high rates of clinical setbacks, any new approach that brings even a modicum of efficacy or speed to the R&D process could trigger huge returns — a pursuit investors are still rewarding. 

Here’s a look at the biotech that raked in that major haul and at other startups that have recently won funding to chase the AI dream. 

Isomorphic Labs’ potential AI goldmine

Months after snagging the Nobel Prize in Chemistry, the CEO of Isomorphic Labs helped the company bag $600 million in its first round of external fundraising. 

The company’s AI drug discovery platform is based on AlphaFold software, which can predict protein structure, DNA, RNA and ligands that bind to targeted proteins, while creating new proteins as well. The invention was rolled out by Google DeepMind and led to a Nobel Prize for three scientists, including Demis Hassabis, CEO of both Isomorphic and Google DeepMind. 

Hassabis predicted last year that AlphaFold could help create an AI drug discovery business worth more than $100 billion — a mouth-watering proposition that investors are clearly eager to get behind.

The company’s ultimate aim is to shrink the average discovery time from five years to two. Isomorphic is also exploring emerging modalities and developing its own pipeline of candidates targeting cancer and autoimmune diseases.

"AI and machine learning have long held the promise of transforming drug discovery, yet few companies over the past decade have unlocked their full potential,” Dr. Krishna Yeshwant, managing partner at GV, one of the firms that participated in the funding round, said in a release. “After witnessing the extraordinary pace of innovation at Isomorphic Labs, we believe their pioneering approach will redefine AI-powered drug discovery.”

Thrive Capital led the $600 million funding round in March with additional boosts from GV and Alphabet.

Isomorphic also landed research collaborations with Eli Lilly and Novartis aimed at discovering small molecules for undisclosed targets last year. Combined, the research partnerships are worth up to $2.9 billion. 

Other recent AI wins

Isomorphic’s $600 million haul was the largest biotech funding round so far this year. But other AI companies have also scored significant backing.

Insilico recently nabbed $110 million in a series E round led by Value Partners Group, which has been around since the 1990s and claims to be one of the largest independent asset management firms in Asia.

The fresh capital will help Insilico refine its AI models and algorithms while it advances its pipeline of clinical candidates, the company said.

A duo of smaller upstarts also pulled in funding this year.

Simon Kohl, a scientist who worked on the second iteration of AlphaFold and co-led DeepMind’s protein design team, arrived on the biotech scene with a startup of his own in February. Called Latent Labs, the company’s AI platform is focused on “applying the latest generative techniques to design proteins from scratch,” it said in a release. Latent emerged from stealth with $50 million in funding.

Two notable names from their respective fields also unveiled an AI drug discovery startup. LinkedIn co-founder Reid Hoffman and Columbia professor Dr. Siddhartha Mukherjee, author of a landmark cancer history book “The Emperor of all Maladies,” have joined forces to launch Manas AI. The startup will leverage a Microsoft cloud computing platform and AI to design and hunt for treatments in cancer, autoimmune and rare disease, including “some previously considered unreachable,” it said in January.  

Manas AI raised $24.6 million in seed funding and will initially set its sights on breast cancer, prostate cancer and lymphoma.

Layoffs are a fact of life in the pharma and biotech industries with companies frequently adjusting headcount as their priorities shift. But the steady stream of cuts grew stronger last year as various market uncertainties forced companies into sink-or-swim situations.

In 2024, the pharma industry axed 14,010 jobs — an uptick from the 12,859 jobs lost the year before, according to estimates by Challenger, Gray & Christmas, an outplacement and executive coaching company.  

Now, looking broadly across the U.S., the job loss picture is even more grim. Amid a downsizing push in government workforces, the U.S. shed over 172,000 jobs in February — the highest recorded monthly total since 2009, Challenger, Gray & Christmas reported. The sharp rise in layoffs was driven by the dramatic cuts in the government sector, which erased 62,242 jobs during the month.

And any of the former federal employees who lost a job at a healthcare agency and might come looking for work in the private pharma sector face an industry with challenges of its own.

So far this year, no type of company has been immune to layoffs, which have hit pharmas of all sizes and in various therapeutic niches. 

Yet, some trends have already emerged in this year’s layoff climate. A look at the companies weathering staff cuts illuminates some of pharma’s ongoing changes.

Restructuring and spinoffs 

Facing patent cliffs and wider economic uncertainty, several large pharmas are undergoing long-term restructuring efforts that are triggering job losses. 

Bristol Myers Squibb shed more than 2,000 from its staff in 2024 and is continuing cuts this year as part of a plan to achieve $2 billion in cost reductions by the end of 2027. The company recently reported that 57 staffers at a California facility specializing in the tumor microenvironment will get the axe. The company also nixed over 200 employees in New Jersey in February. 

Alzheimer’s drug development partners Eisai and Biogen are also revamping their companies as the pair’s approved treatment Leqembi experiences sluggish sales.

Cuts at Japan-based Eisai will impact about 7% — or 120 positions — as it restructures its workforce, the company said in February. The reductions will sweep across a broad range of functions and trim its U.S.-based workforce by about 60 employees.

Biogen has also been undergoing far-reaching layoffs since 2023 and reduced its R&D staff in January by an undisclosed amount to better align with a renewed focus on preclinical candidates.

Sales for Leqembi grew in 2024 and were on track to hit $279 million by the end of the year, Eisai reported in November. But the company also lowered its forecast for the Alzheimer’s treatment, which has faced coverage challenges and ongoing skepticism about safety and efficacy.

Galapagos is also hoping a major restructuring will reverse its fortunes.

Since its launch in the late 1990s, the Belgian company has attracted a fair amount of biotech buzz thanks to its broad pipeline and innovation aims; its 10-year research collaboration with Gilead; and its decision to hand the CEO reins to Dr. Paul Stoffels, a well-known former Johnson & Johnson executive, in 2022.

But the company has also been hit with setbacks and has only scored regulatory wins for one drug — a rheumatoid arthritis JAK inhibitor called Jyseleca that in 2022 was given the nod in the EU, U.K. and Japan. In the U.S., however, the FDA rejected the blockbuster hopeful due to toxicity concerns.

With the company’s pipeline now dominated by CAR-T cell therapy candidates in oncology and small molecules in immunology, Galapagos announced this year that it plans to split into two entities. Galapagos will continue developing its pipeline, while a new, publicly traded entity will bring in new assets through transactions.

The change will eliminate about 300 positions in Europe — or 40% of the company’s workforce, Reuters reported.

Cell and gene therapy struggles 

The investment landscape for cell and gene therapies looked considerably dryer last year compared to a COVID-era boom. Yet, toward the end of 2024, the winds were shifting again. Halfway through the year, about $11 billion had been funneled into the space. Although the pace was lower than the $22.7 billion peak in 2021, investments were on track to outstrip the year before.   

Much of the cash infusion was aimed at later-stage assets, leaving the environment “challenging” for startups with preclinical candidates, the CEO of the Alliance for Regenerative Medicine said at a conference in October. 

At the same time, clinical-stage companies have also grappled with a mix of R&D and manufacturing-related setbacks.

Atara Biotherapeutics recently reported in an SEC filing that it’s cutting half its workforce.

The company scored an EU approval of an off-the-shelf T cell therapy treatment for an ultra-rare blood cancer in 2022 and was gunning for an FDA nod. Instead, the agency rejected the treatment in January after an inspection of a third-party manufacturing facility turned up issues. The company said at the time that if it couldn’t find more funding it would have to cut expenses.

In addition to the staff reduction, Atara is also now halting development for two CAR-T cell therapy candidates, including an allogeneic treatment it had hoped could become one of the first treatments using the technology in the autoimmune space. The most recent cuts followed two other rounds of layoffs at Atara — one that shrunk the headcount by 25% last year and a 20% cut in 2022.

And even cell and gene therapy developers that have won approvals have faced commercialization challenges tied to the cost and complexity of the treatments. 

CRISPR Therapeutics, which scored the first FDA approval for a CRISPR-based therapy along with partner Vertex Pharmaceuticals, is now slashing an undisclosed number of positions, according to reports. The news follows a reduction in headcount that hit about 50 jobs at the company in 2023 and comes amid broader cuts in the CRISPR drug development space, which has experienced a 50% plummet in stocks over the last year, STAT recently reported. 

The lengthy process involved in administering CRISPR’s approved gene editing therapy for sickle cell disease has slowed its launch on the market. Just 50 patients had begun the process of cell collection for the therapy, Casgevy, according to the company’s fourth-quarter earnings report last year.

Several other biotechs specializing in cell or gene therapies have also cut staff or closed shop this year, including Passage Bio, Notch Therapeutics and Spotlight Therapeutics.