Venture Capital Funding in Biopharma Declines 20% in Q1 2025, But Megarounds Keep Median Deal Size High

The first quarter of 2025 saw a significant drop in venture capital (VC) financing for the biopharmaceutical industry, with total funding declining 20% year-over-year to $6.5 billion. Despite this overall decrease, a handful of substantial funding rounds helped maintain a high median deal size, particularly for late-stage companies.

Funding Landscape and Key Trends

According to a recent report from GlobalData, the number of VC investments in the pharma sector totaled 162 in Q1 2025. This marks a return to the post-pandemic downturn levels seen in 2022 and 2023, following a brief uptick in 2024. Alison Labya, business fundamentals pharma analyst at GlobalData, noted a shift in investor focus: "Amid the ongoing macroeconomic uncertainty, venture capitalists are favoring opportunities with clearer routes to near-term revenue and market access over longer-horizon development risks."

This trend is reflected in the higher median deal values for late-stage firms. Companies in Phase III clinical trials saw a median deal value of $62.5 million in Q1 2025, representing a 39% increase compared to the $45 million median for the entirety of 2021. However, this figure is still lower than the approximately $100 million median observed in 2024 for late-stage deals.

Megarounds Drive Q1 Funding

Despite the overall decline in VC activity, the quarter was marked by several significant funding rounds. J.P. Morgan reported that 19 venture capital rounds raised $100 million or more during this period. Notable among these was Isomorphic Labs, a Google AI drug discovery venture, which secured the largest fundraising of the quarter with a $600 million round announced in late March. The company has set an ambitious goal to "solve all diseases" through its AI-driven approach.

Other substantial rounds included:

1. Verdiva Bio: Launched in early January with $410 million in initial funding to develop next-generation oral and injectable obesity treatments.

2. Eikon Therapeutics: Raised a $350.7 million Series D in February, bringing its total funding to $1.1 billion. The company plans to use the funds to advance its lead candidate, EIK1001, into Phase III clinical trials.

3. Kardigan: A cardiovascular-focused startup that debuted in January with a $300 million Series A round, led by former executives from MyoKardia.

4. Aviceda Therapeutics: Secured a $207.5 million Series C round to develop immunomodulators for inflammatory diseases, with plans to initiate clinical trials for its lead asset, AVD-104, in geographic atrophy.

Shifting Focus and Future Outlook

The concentration of funding in later-stage companies and the prevalence of megarounds suggest a cautious approach by investors in the current economic climate. This trend may continue to shape the biopharma funding landscape in the coming quarters, potentially impacting early-stage research and development efforts across the industry.

As the sector navigates these challenging times, companies with promising late-stage assets or innovative approaches to drug discovery, such as AI-driven platforms, may find themselves better positioned to attract substantial investments. However, the overall decline in VC activity could lead to increased competition for funding among early-stage biotechs, potentially driving further consolidation or strategic partnerships within the industry.