Massachusetts Biopharma: Signs of Rebound and Growth Amidst Uncertainty

Jan 17, 2025

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The biopharma industry in Massachusetts showed promising signs of recovery in 2024, a year marked by increased venture capital (VC) funding, a slight resurgence in initial public offerings (IPOs), and substantial merger and acquisition (M&A) activity – especially early in 2024,  according to MassBio’s newly released year-end report. For the first time ever, the report also found that private biopharma companies based in Boston collected more venture dollars than those headquartered in Cambridge, a data point we’ll watch carefully this year for signs of a trend.

MassBio’s head of external affairs Ben Bradford told The Boston Globe that “2024 showed us that the industry is on its way back up,” calling a pick-up in IPOs in 2024 and a nearly half-billion dollars in venture money raised by local companies in the first week of the new year “green shoots.”

2024 Venture Capital Funding: A Welcome Rebound

One of the most notable developments in Massachusetts’ biopharma sector in 2024 was a small but meaningful increase in venture capital funding. Massachusetts-based companies secured $7.89 billion, surpassing the previous year’s total by over $220 million. This marks the first year-over-year rise in funding since the pandemic years of 2020-2021. The continued prevalence of megarounds, however, does mean we must temper expectations of a broad return of investor confidence.

Massachusetts-based companies accounted for 28.3% of national VC dollars, second only to California (41.6%). Though New York came in a distant third with just 6.6%, North Carolina and Texas were right there with the Empire State. These are certainly two states positioning themselves as innovation hubs with lower costs of living, something to monitor closely as debates over competitiveness continue.

A significant trend continued in terms of the regionalization of the industry in Massachusetts, with 72% of the venture funding going to companies based outside of Cambridge. While Cambridge had more deals than Boston (73 vs. 62), Boston led in total VC funding, securing $2.3 billion compared to Cambridge’s $2.2 billion. This shift suggests that growing mid-stage private companies increasingly gravitate to Boston’s Seaport and nearby suburbs like Watertown, Waltham, and Burlington, while Cambridge remains the hub for early-stage startups and global pharmaceutical giants.

“Not only is biotech back, but Massachusetts is leading the recovery with a return to the fundamentals of investment following the best science on its way to patients,” said MassBio CEO and President Kendalle Burlin O’Connell. “We saw venture firms invest in startups with promising data and pharma companies acquire and partner with companies with advanced pipelines. We also witnessed the maturation of a cluster, with Boston staking its claim as the place growing companies go to advance through the clinic.”

Mergers and Acquisitions: An Early Surge

Pharmaceutical companies started 2024 with an explosive quarter for mergers and acquisitions, particularly in the first quarter. In total, 15 out of 32 deals to acquire Massachusetts companies were announced between January and March, accounting for nearly half of the year’s total. Although the number of M&A deals was down six from 2023, the total value surged dramatically to $42.6 billion—up from just $13 billion the previous year.

Bristol Myers Squibb’s $13.8 billion acquisition of Boston-based Karuna Therapeutics was the largest deal of the year. The acquisition quickly paid off when the FDA approved Karuna’s schizophrenia drug, Cobenfy, just six months later. This is the first new treatment for schizophrenia in decades, delivering another option for patients who were disinclined to take previous medicines due to side effects. Massachusetts-headquartered companies also led acquisitions, with the sale of Alpine Immune Sciences (Seattle, WA) to Vertex Pharmaceuticals topping the list at $4.9 billion.

Despite the surge in total deal value, the overall number of M&A transactions slowed toward the end of the year. This year, we saw a few deals announced at the start of the annual J. P. Morgan Healthcare conference in San Francisco, including two acquisitions of Massachusetts-based companies, but only time will tell if this signals another strong first quarter in 2025.

IPOs: The Window Opens More

The public market saw improvement in 2024, with Massachusetts biotechs completing six IPOs, tripling the number from the previous year. Notably, Bicara Therapeutics (Boston), Zena Therapeutics (Waltham), and Upstream Bio (Waltham) raised the most from their IPOs. However, the market proved volatile, as the stock values of five of these companies were trading below their initial prices by year’s end. Only Rapport Therapeutics showed modest gains, signaling that while investor confidence is returning, market conditions remain unpredictable.

The Globe’s Larry Edelman posits that “financial and regulatory headwinds, including high interest rates and uncertainty about President-elect Donald Trump’s health care policies” explain why biotech stocks performed poorly last year despite other signs of a rebound.

Innovation at the Core: Drug Development Continues

Despite the financial landscape’s ups and downs, Massachusetts’ biopharma sector remains a powerhouse of innovation. Local companies are actively developing over 1,800 drug candidates, representing 15.1% of the U.S. pipeline and 6.4% globally. In 2024 alone, 23 companies either based in or with a significant presence in Massachusetts received FDA approvals for groundbreaking treatments in diseases such as RSV, schizophrenia, and leukemia.

The industry’s success relies on continued investment in early-stage companies—the engines where the riskiest science gets done and breakthroughs can happen. That why early-stage support I a key priority for MassBio’s Vision 2030 strategic plan. With the Legislature’s approval and Governor Healey’s signature on a new Massachusetts Life Sciences Initiative (LSI) that spans the next decade, the state is well-positioned to build on its momentum.

Looking Ahead: 2025 and Beyond

As the Globe’s Larry Edelman reminded us, “Biotech is a risky business. The average cost of developing a new drug is almost $900 million. Nine out of 10 never make it to market. Yet the Massachusetts biotech sector has been a reliable engine of the economy even in tough times. That won’t change any time soon.”

The outlook for the industry nationally, according to some experts, remains cautiously optimistic. A recent article in Nature Biotechnology suggests that while 2024’s recovery has been a positive signal, the biotech industry in 2025 will likely experience more of a “transition year.” However, PharmaVoice wrote in their own predictions that after a year marked by a smaller deal volume and right-sizing portfolios, economic conditions may be ripening for a more active M&A environment to fill gaps in research and development.

While PharmaVoice points to oncology, obesity, immunology, and neurology as the therapeutic areas likely set to reap the most R&D dollars, the shift toward personalized medicine and the continued advances in gene therapy are also expected to fuel growth. According to FierceBiotech, 2025 will likely see increased focus on rare disease treatments and precision oncology, with major biotech hubs like Massachusetts at the forefront of these innovations. Matching what MassBio uncovered in the development of our Vision 2030 strategic plan, a continued rise in AI-driven drug discovery and advancements in mRNA technology will drive new therapeutic developments, presenting exciting opportunities for Massachusetts’ biopharma companies and tech companies alike.

Massachusetts’ continued focus on fostering early-stage startups and diverse founders, coupled with the state’s proprietary mix of talent, research institutions, and biopharma companies, positions it to maintain its leadership role in the life sciences sector for years to come.

“With a new Life Sciences Initiative in hand, and our own MassBio Vision 2030 roadmap to follow, you can count me among those who are bullish for the local industry in the year to come,” Burlin O’Connell further added.

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