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What does 2024 hold for biopharma: Funding?

Michael Salako, Start Codon Investment Director, recently took part in an interview for Scrip Asks, contributing his thoughts around biopharma funding in 2024.

Sharing his predictions, Michael said: "Signs are that the funding environment for 2024 is generally going to be a difficult one. If the US Federal Reserve starts to reduce interest rates (which could happen as soon as Q2 2024), this would enable capital to be moved out of risk-free money market funds and into potentially higher yielding, riskier asset classes such as venture capital (other countries would likely follow suit on reducing rates). However, this kind of change takes time to trickle down to those seeking funding. I’d expect any benefit from a change like this to only be felt by companies towards the end of 2024 or early in 2025.

"Other factors making the funding environment challenging are uncertainty around when the IPO window will open again. When this does open up, it should alleviate the need for VCs to continue sustaining companies on the cusp of going public. The appetite for mergers & acquisitions is also still unclear, with many in big pharma continuing to restructure off the back of declines in drug sales around COVID-19 products. All of this backs up the likelihood of 2024 being a difficult year for the industry.

"As a result, I’d predict we will see an increase in partnering activity, as private companies seek partner relationships to signal market demand to investors. This would help extend runways and enable a big pharma/biotech ramp-up in engagement on smaller, less-committed, transactional deals around novel and differentiated products.

"Taken together, companies that can weather the storm through 2024, could emerge in a strong position as we head into 2025."

Read more from the Scrip Asks series.