JPM’s Cautious Optimism

Jan 18, 2024

By Ben Bradford, Head of External Affairs

San Francisco, California

As many in the industry look back on 2023 it goes without saying that it was a reset from the pandemic fueled highs that we saw from 2020 – 2022.  As MassBio’s funding report shows, 2023 was not all bad, but headwinds were certainly prevalent through most of the year.  As we leave the 2024 version of the annual JP Morgan conference, one can only hope that the year reflects the beautiful weather we had this year as opposed to the ominous start to 2023.  

In this setting unlike any other, the overarching sentiment of the global biopharma community (small biotechs, large pharma, funders, and other ancillary organizations) for 2024 was cautious optimism.  Things won’t be back to the fervor of 2021, but we are on the upswing. But why?   

Dealmaking Normalization – Following three years of a supercharged funding environment with pre-clinical companies receiving large funding rounds, relatively early-stage companies going public, and an infusion of unconventional capital, 2023 saw the pendulum swing in the opposite direction. Companies with data were able to raise significant amounts of capital while the average seed funding for Massachusetts companies dropped over $1 million year-over-year.  Let’s hope 2024 sees that pendulum settle closer to the middle allowing start-ups enough runway to get to those critical data points.  

Optimism for Exits – The last few months of 2023 saw a flurry of M+A activity and a sharp stock rally for public biotechs indicating the potential for further loosening in 2024.  Last year, over $13 billion was spent on Massachusetts biopharma companies – an increase of more than $7 billion from 2022.  Following the previously mentioned pandemic-era boom, valuations seem to have settled to a point where buyers and sellers can agree on a deal.  With large pharma sitting on $1.4 trillion, let’s hope the current trend continues and valuations remain realistic! 

Nationally we saw a much slower IPO market in 2023. Rumors in San Francisco were swirling regarding an uptick in IPOs early in 2024 and this optimism again reflects what we saw at the end of 2023. From the end of October through the end of the year, the XBI increased by nearly 40%.  While Massachusetts only saw 2 IPOs last year, both of those company’s stocks ended the year with a higher stock price than the original list price.   

The hope is that with renewed exit opportunities, the original investors should have capital available to reinvest in early-stage companies – preferably seed and Series A.  

Macroeconomic Stabilization – Without question, predictability makes decision making easier.  As we enter 2024 signs are pointing toward a more stable economic situation than we saw in late 2022 and 2023.  Inflation seems to have regulated, which in turn has allowed the Fed to slow, pause, and potentially reverse some of the rate hikes we saw last year.  Can these positive signs keep the United States out of a recession?  

This cautious optimism must remain just that – cautious.  While we do see the light at the end of the tunnel and the industry seems to be getting back to basics, headwinds and hiccups will remain.  Macroeconomic trends have stabilized, though the cost of doing business (goods, services, labor, and rates) remain higher than pre-pandemic norms. Companies that are still operating off pandemic era investments but haven’t been able to produce sufficient data or follow-on funding will likely shutter.  Policymakers could also stifle innovation through the IRA, Bayh-Dole rollbacks, and FTC interference, deterring interest in funding early-stage research. It is nice to be optimistic again, even if we must force ourselves to temper it for now. 

About the Author

Ben Bradford joined the MassBio team in 2017. As Vice President of Economic Development and Workforce, he oversees MassBio’s relationship with municipalities, international organizations, and the local real estate and development community.  He also works with member and non-member companies to support their decision-making on relocation or expansions. Through relationships with foreign economic development agencies, Ben works to connect foreign companies to the US market. Additionally, he serves as a resource for Massbio member companies as they look to grow their operations in Massachusetts from a personnel standpoint.

Prior to MassBio, Ben worked as Director of Business Development and Regional Strategy at the Massachusetts Life Sciences Center where he was responsible for recruiting new companies to do business in Massachusetts and developing relationships with municipalities across the Commonwealth with the goal of expanding the industry state-wide.

Ben has a B.A. in Political Science from Union College(NY). He lives in North Reading with his wife and two kids.

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