This article is part of the Life Sciences Industry 2025 Market Update. Click here to read the full newsletter.
Life sciences capital markets in 2025 have been a mixed bag—some rays of light peeking through, but still, plenty of clouds for early-stage companies hoping to tap the public markets. After a long IPO drought, 2024 brought a few green shoots, with several life sciences companies testing the waters. The modest increases in 2024, as seen in a handful of IPOs—mostly by companies with later-stage assets, strong data, or a well-known management team—signaled continued momentum into 2025. However, through the first half of 2025, the broader window for IPOs and access to public capital markets remain narrow. The bar is still high, and investors are showing up more as picky partners than enthusiastic bidders. This is consistent with an increase in deal sizes, indicating investor confidence in companies with strong innovation or promising results.
Follow-on offerings have seen a bit more activity, especially for companies with clinical catalysts or positive data readouts. But for earlier-stage players, especially development-stage/pre-revenue companies, without any near-term news, the story has not changed much—the traditional path to a public raise is still challenging. Valuation compression continues, with companies facing depressed stock prices or reduced trading volumes, such that even well-positioned companies have had to get creative with structure and timing to get deals across the line.
Alternative financing structures have started to step in to fill the gap. PIPEs (private investments in public equity) have made a modest comeback—particularly for micro- and small-cap firms looking for speed and certainty over splashy valuations. There has also been an uptick in at-the-market offerings and resurgence of equity-line-of-credit offerings, so that companies can get some access to the public markets without overly diluting their stockholder base at a time when equity may be undervalued. Many companies may need such strategies to extend their runway until there is a broader resurgence in public markets for life sciences companies. Meanwhile, convertible preferred rounds have become a go-to for crossover-stage or recently public companies aiming to raise capital without taking the full dilution hit. Other non-dilutive financing methods, such as royalty financings, may also grow.
For earlier-stage life sciences companies, the message is that flexibility is paramount. Investors have become more selective and strategic. They want data, de-risking, and a clear path to value creation. If you are thinking about public markets, be ready with a compelling story, a strong team, and a financing strategy that may need to go beyond the old playbook. It is certainly not 2021 anymore—but thoughtful, well-prepared companies can still find ways to capitalize in today’s market.
The near-term outlook is generally cautious optimism. Generalist investors are peeking back into the space, and big pharma’s appetite for innovation has not slowed, but it will continue to be selective. For early-stage companies, it may not be a full reopening of the equity markets—but it is no longer a hard “no,” either.
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