Earlier this month our international team attended the J.P. Morgan Healthcare Conference (JPM) 2025. Below Adrian Toutoungi and our team have put their heads together to provide a summary of what they heard at the conference concerning M&A, public markets, private fundraisings, biopharma partnering transactions, hot modalities and hot disease areas.
How was market sentiment?
Growing optimism for deal making was the prevailing sentiment amongst the biotech CEOs and investors. Anecdotally, while overall attendance was not record breaking, deal making was on the agenda and creating a buzz. The Cambridge (UK) cluster was particularly well represented.
There was a sense of anticipation for both the impact of regulatory and policy changes of the Trump administration. This, simultaneously, leads to uncertainty as well as creating opportunities for innovation and growth with an expected reduction in red tape, and the impact of the wave of AI innovation whose penetration into new areas and use cases in life sciences will continue to accelerate in 2025. Tellingly, the NVIDIA presentation was one of the hottest tickets of JPM 2025.
It was exciting to see Project Mirror's 'Wear Pink' initiative take shape with hundreds of attendees wearing pink to show support and solidarity for female CEOs in biotech.
M&A
There was general consensus that despite macro risks such as the potential for inflation, uncertainty over regulatory direction as well as the unpredictable geopolitical environment, 2025 will see an increase in M&A activity as Big Pharma continues to grapple with a looming patent cliff. Drugs sales of USD250 billion are at risk between 2025 and 2029.
The change of administration in the United States will also bring new leadership to the Federal Trade Commission (FTC) which, along with the Department of Justice (DOJ), enforces US antitrust laws and so plays a crucial role in setting the environment for biotech exits. During the Biden administration, under Lina Kahn, the FTC intervened to oppose in the Amgen/Horizon merger and the Sanofi/Maze collaboration (Phase 1 asset for Pompe disease). It was generally perceived as having created a hostile environment for biopharma deal-making based on novel theories of harm. It remains to be seen what impact Andrew Ferguson's recent appointment will have, but this background suggests that he may adopt a higher threshold to challenge deals than his predecessor.
Last year was a steady but undynamic year for M&A, with only GLP-1 acquisitions pushing above the USD5bn deal value threshold. 2025 started with a bang as Johnson & Johnson (J&J) announced at JPM it was acquiring Intra-Cellular Therapies for USD14.9bn in the biggest biopharma deal since 2018.
J&J is facing a loss of exclusivity for its immunology blockbuster Stelara™ (Ustekinumab). Intra-Cellular Therapies offers it a step up in clinical depression and schizophrenia products with its potential blockbuster Caplyta™ and a pipeline of neuropsychiatry drugs in developments (a space where J&J has had recent success with ketamine Spravato™ (depression) and where the acquisitions in December 2024 of Cerevelle by Abbvie (for USD7.8bn) and Karuna by BMS (for USD14bn) raised expectations for neuropsychiatry).
A second deal announced going into JPM was GlaxoSmithKline's (GSK) acquisition of IDRx Oncology for USD1bn, with a further payment of USD150 million in the event of regulatory approval. GSK is facing loss of exclusivity for Trivicay™ (Dolutegravir) and is building back its oncology franchise 10 years after disposing of its then oncology business to Novartis.
IDRx is a clinical-stage oncology company with a Phase 1/1b small molecule KIT tyrosine kinase inhibitor in development for gastrointestinal stroma cancer (which is classed as an orphan disease but is the most common soft tissue tumour to affect the GI tract). IDRx only emerged from stealth in March 2022 with a USD122m Series A (see our comment on megarounds below) and an in-licensed asset from Merch KGaA. It followed up with a USD120m Series B in October 2024. Investors include A16Z, Blackstone, RA Capital and Merck KGaA.
These two examples illustrate the variety of pharma M&A strategies. The conventional wisdom is that pharma companies primarily target biotechs with late-stage assets, either marketed drugs or products with clinical proof of concept in Phase 3 trials.
However, Christopher Viebacher of Biogen is reported as commenting at JPM that late-stage assets are, of course, thin on the ground, and so Big Pharma is also open to acquiring biotechs with earlier-stage assets where there is strong early clinical data. In these cases, an element of contingent consideration is common.
Where this can't bridge the valuation gap between buyer and seller, an additional mechanism which can be used is the concurrent spin-out model. This mechanism was deployed in the third big JPM M&A announcement, the acquisition by Lilly of ‘up to’ USD2.5bn of Scorpion Therapeutics' PI3Kα inhibitor asset (a Phase 1 or 2 breast cancer) and its P1dK pipeline for USD2.5bn.
The transaction was structured as a company acquisition, with a concurrent spin-out of all non-PiK3 assets, management and employees to create a new company which will be owned by Scorpion's existing shareholders (including Atlas Ventures, Vida Ventures and Omega Funds). Lilly is also taking a minority equity stake in the newco. (early Phase 1/2 data suggests that the drug candidate might be superior to other products in the crowded anti-PI3Kα class and offer coveted 'best-in-class' status).
Whilst the total deal value is eye catching, Lilly did not disclose the breakdown between the upfront payment and the regulatory and sales milestones and the total deal value is rumoured to be heavily backloaded.
Deferring a significant portion of total consideration by using regulatory or milestone structures is becoming so common in the current M&A deal environment that a quip doing the rounds at JPM was that "M&A is the new licensing".
Public markets
2024 saw only tepid IPO activity. With inflation remaining stubbornly higher than anticipated, constraining the room for downward movement in interest rates, the general view is that 2025 will bring more of the same. There doesn't seem to be much expectation of stimulus in the capital markets or a significant opening of the IPO window.
Private fundraisings
Venture capitalists (VCs) have plenty of dry powder which they need to invest. New funds are still being formed, adding to the cash pile. For example, shortly before the start of JPM, A16Z and Lilly launched a new first-of-its-kind co-managed USD500m patient capital fund (separate from Lilly Ventures, but with Lilly as the sole source of capital).
Two themes emerging from various discussions with VCs at JPM were:
- Limited partners (LPs) are concentrating their capital in the hands of well-known VCs with strong track records, and newer teams are finding it harder going to raise new funds.
- European and Middle Eastern LPs (and particularly the latter) are relatively underweight in venture as an asset class, compared to US LPs, and so are being increasingly courted by US VCs.
On the investment side, the phenomenon of the 'megaround' was much discussed, prompted by announcements by Verdiva Bio and Kardigan Bio going into JPM (and six other USD100m+ fundraisings being announced during JPM week). Verdiva Bio, helmed by former Aiolos Bio executives and investors (metabolic focus – a once weekly oral GLP-1 asset), announced its launch with a USD411m Series A. And Kardigan Bio, helmed by former MyoKardia executives (cardiology), launched with a USD300m Series A.
There have been over 100 USD100m+ Series A venture rounds in recent years, with Altos Labs and Xaira topping the table with USD1bn+ Series A rounds in 2023 and 2024 respectively. Explanations for this trend include:
- founders/management/investors wanting to raise enough in a single financing, albeit tranched, to take the company to a significant value inflection point
- companies becoming more ambitious in their chosen value inflection point and/or the costs of clinical trials increasing
- VCs who have raised megafunds needing to raise their minimum cheque size in order to achieve outsized fund performance
It isn't self-evident that megarounds are a good idea. Potential problems include:
- founders suffering very heavy dilution
- stratospheric pre-money valuations needing to be achieved if a subsequent financing round is required
- if a syndicate of many venture investors is required to fill out the round, each venture fund will own only a small percentage, which may make it hard to achieve a return at a significant multiple on exit.
Nevertheless, the consensus is that this concentration of capital in larger, but fewer, Series A rounds is set to continue, or at least continue to grab the headlines.
Biopharma partnering transactions
Interest in Asian assets remains high, with events focusing on Chinese and Korean partnering opportunities being well attended by Big Pharma as well as venture funds.
This trend is due to efforts by the Chinese government over the last 10 years to upgrade the country's technical capabilities by upping investment in innovation. In life sciences, this has involved providing equity funding, discounted or even free lab space and grants to support biotechs.
Chinese biotechs can generally move faster and at lower cost than their US counterparts. A start-up can go from launch to clinical trial in 18 months or less (compared to several years in the US or Europe). Clinical trial enrolment of patients is faster and cheaper, and staff and supply costs are lower.
The quality of science and drug candidates has also dramatically improved, with 'me too' programmes giving way to 'me better' or 'best-in-class' assets, and tackling novel targets or and complex modalities such as antibody-drug conjugates (ADCs), T-cell engagers and novel antibody formats/multifunction antibodies.
Recent evidence of the quality of assets coming out of Chinese biotechs include:
- Beigene's approved chronic lymphocyte leukaemia (CLL) drug Brukinsa™ (zanubrutinib), a third-generation Bruton's tyrosine kinase (BTK) inhibitor, is outperforming J&J/Abbvie's blockbuster Imbruvica™ and AstraZeneca's Calquence™ (acalabrutinib) in trials and sales are growing strongly.
- Ivonescimab, a PD-1/VEGF bispecific antibody being developed by Summit Pharma under licence from Akeso, appears to be 49% more effective at reducing risk of disease progression on death in non-small cell lung cancer (NSCLC) than Keytruda (the world's top-selling drug), with the caveat that the trial data so far is all from Chinese patients.
The market is recognising that some high-quality molecules are coming out of the People's Republic of China (PRC). Recent VC-backed newcos based on in-licensed Chinese assets include Kailera Tx, Verdiva Bio (see above), Candid Tx and Ouro Medicines (all launched with USD100m+ financings). Closer to home, Apollo Tx has recently closed the in-licence of a clinical-stage Phase 1-ready asset from Sunshine Lake Pharma Company.
Hot modalities
Several advanced therapeutic modalities were widely discussed during the conference, in addition to the usual interest in small molecules (favoured for ease of administration) and continuing interest in antibody drug candidates and new format antibodies.
Gene editing: Technologies such as CRISPR-Cas9 remain at the forefront due to their potential applications in treating genetic disorders through precise genomic modifications.
mRNA therapies: Building on the success of mRNA COVID-19 vaccines, there is increased emphasis on expanding mRNA technology applications beyond infectious diseases to encompass cancer treatments.
Protein degraders: Targeted protein degradation technologies represent an emerging area with potential for addressing previously 'undruggable' targets by harnessing mechanisms that selectively degrade disease-causing proteins.
Oncolytic viruses: The utilisation of genetically modified or naturally occurring viruses that selectively infect cancer cells offers a unique approach combining direct tumour lysis with immune system activation against cancers.
Cell therapies: Innovations in CAR-T cell therapies continue to be transformative for haematological malignancies, and there is cautious interest in potential applications in auto-immune (eg targeting disease-causing B cells), while stem-cell-based treatments show promise across various regenerative medicine applications. However, it is fair to say that the level of interest in cell therapies (and gene therapies) was more muted this year.
Artificial intelligence: Strikingly, almost every conversation involved a discussion about the rapid strides in the use of artificial intelligence (AI) in the drug life cycle (not just in AI drug discovery, but also in pre-clinical development, clinical trials, manufacturing and post-approval vigilance). Our own thought leadership event about the impact of the EU AI Act and the EMA's reflection paper on the use of AI in the drug life cycle for the contents of CTA/IND applications, NDA/MAA dossiers and GCP or GMP inspections was packed to capacity.
Genomics: Within the genomics sphere, the announcement of the UK Biobank Pharma Proteomics Project was a welcome reminder of both the exciting multiomic initiatives enabling biomarker discovery, disease prediction and drug development, and the UK's role in facilitating this movement. The project is also expected to provide another valuable dataset in the AI revolution.
Hot disease areas/indications of interest
Several disease areas were highlighted as focal points for investment and development.
Metabolic: GLP-1 candidates continue to be extremely popular, if they are differentiated in some way or offer the prospect of being 'best in class'. The Verdiva Bio launch (discussed above) is a good example of a differentiated GLP-1 asset which attracted high interest from investors.
Oncology: This remains a top priority given ongoing advancements in personalised cancer treatments including checkpoint inhibitors (PD-1/PD-L1), bispecific antibodies targeting multiple tumour antigens simultaneously, tumour-infiltrating lymphocytes (TILs), and adoptive T-cell therapies.
Immunology and inflammation (I&I)and CNS (neuropsychiatry): These were both hot indications at JPM 2025 and continue to be in favour.
Rare diseases: There seemed to be a renewed interest this year in orphan drugs, after a few years where they have been lower profile. Perhaps this is due to renewed appreciation for the regulatory incentives such as expedited approval processes, and the exemption from mandatory price negotiation under the US Inflation Reduction Act (IRA) for an orphan drug (at least for single indication orphans). There is also speculation that the new US administration might look favourably on BIO's attempts to have the IRA amended to extend the price negotiation exemption to all orphan drugs.
