Biotech Investment Witness Dramatic Slide as VC Funds Shift Focus Towards AI

Investment in the biotech sector has fallen off a proverbial cliff in recent years, according to a new data analysis by PitchBook. The sector has seen record low levels of fund-raising over the last decade, enduring a 92% drop since its peak in 2018. In just the past year, biotech-focused funds represent a meagre 3% of all venture capital raised across different asset classes. While once a darling of the venture capitalists, biotech has fallen from grace, its decline marked by surges in capital costs, fewer IPOs, malignant post-pandemic effects and a reshuffling of fund priorities. With an accelerated focus on artificial intelligence and other tech sectors, venture capitalists have largely diverted their funds away from biotech, hastening the sector’s fall from favour. Biotech advancements invariably require extensive time, capital, and uncertainty slipping from ideation to commercial realisation. Tucked between these stages is an arduous, unpredictable regulatory process further lengthening the journey to successful commercialisation and shouldering potential high-risk outcomes. Forging a breakthrough could easily be a decade-long expedition, with no guarantee of striking proverbial gold at the journey’s end. However, it’s not all doom and gloom for the sector. Despite the overall decline, biotech still offers some resilience. Biotech exit values have displayed robust resilience compared to other venture favourites, and mergers and acquisitions activity within the sector hasn’t completely flatlined. In fact, the year 2024 saw an increase in biotech exits. VC-backed biotech and pharma companies generated a commendable $19.7 billion in exit value, contributing to around 6% of the total venture exit value for the year. Even amid the general downturn, certain biotech companies managed to pull off successful IPOs, offering glimmers of hope in an otherwise gloomy landscape.