The first half of 2025 has been a bruising one for the biotech sector, weighed down by investor anxiety over political threats to drug pricing, tepid deal activity and regulatory uncertainty. Still, analysts say better things may come in the second half of the year.
Recent research notes from Jefferies and J.P. Morgan analysts point to the continued flow of strategic investments, partnerships in key areas such as obesity drugs, and recent moves by the FDA to meet with industry leaders. Combined, the analyst reports paint a picture of a market that may be bottoming out and offering clues as to what could drive a rebound in the second half of the year.
“There's no doubt [the first half of 2025] has been very rough and sentiment tough (i.e., negative) on biotech,” Jefferies analysts wrote in a May 28 note. “But could reverse in [the second half of the year] and could remove anxiety, driving an "incrementally positive" move up.”
As of May 29, 2025, the SPDR S&P Biotech ETF (XBI) has experienced a year-to-date loss around 10 percent compared to a slight gain of 1 percent during the same timeframe in 2024.
Biopharma Delay Going Public
At least 10 biotech and pharma companies went public in 2025, according to an IPO tracker. Among the largest are Sionna Therapeutics, which is working on treatments for cystic fibrosis, and Metsera, a company focused on obesity drugs. Another company that went public, Aardvark Therapeutics, is developing treatments for metabolic diseases like Prader-Willi syndrome.
“Many companies delayed going public,” J.P. Morgan analysts wrote in a May note. “Some were able to pivot and raise large private rounds, while others remain prepared for when market conditions improve, aiming to capitalize on windows of opportunity to access public markets.”
The banking firm described the global biotech ecosystem as “robust,” with a slightly higher proportion of companies raising financing for the first time in the first quarter of the year occurring more outside the U.S., compared to the same period in 2024.
Overall, J.P. Morgan’s highlights for the first quarter of 2025 included $6.7 billion invested across 109 rounds for biopharma companies, which matched the total from the first quarter of 2024. The 27 merger and acquisition deals announced totaling more than $25 billion.
FDA to Go on CEO Listening Tour
Amid government staffing cuts and shifting policy priorities around vaccines, drug pricing and more (see “Trump’s Drug Pricing Executive Order Splits Biopharma Leaders”) the FDA has made moves to show it’s listening to industry leaders.
The agency announced this month that it will conduct a “national listening tour” to meet with biopharma CEOs. The tour will visit five cities – Atlanta, Boston, San Diego, San Francisco and its offices in Silver Spring, MD.
Among the participants will be Commissioner Marty A. Makary, MD, Principal Deputy Commissioner Sara Brenner, MD, and Director of FDA’s Center for Biologics Evaluation and Research, Vinay Prasad, MD.
“These forums are part of a new initiative to gather direct input from biotechnology and pharmaceutical leaders on how the FDA can modernize its regulatory framework to better support innovation and patient access to safe and effective therapies,” the agency said in its statement.
‘Great Time’ to Start a Biotech Company
One venture capitalist says the doom and gloom makes it an ideal time to start a biotech company.
“The equity markets have collapsed in 2025, the IPO window is closed, the FDA is in turmoil, the NIH is being gutted… and it’s a great time to start new biotech companies.
Why? Because there are so few being created today and there’s far less competition for biotech’s startup resources,” wrote Bruce Booth, DPhil, a Partner at Atlas Venture.
Booth argues that scarcity is a strength - with startup formation down nearly 70 percent from its 2021 peak, there’s less competition for talent, capital and scientific ideas. He said today’s tighter market rewards disciplined founders and sets up new ventures to thrive when investor demand rebounds, especially those launched with strong clinical potential.
“The startups being created today — the few and the proud — will likely be the emerging stars of the 2030s,” he wrote.