Biotalk Episode 4: 2023 Q2 Report: Global Trends in Biopharma Transactions

During this episode of Biotalk, Geoff Meyerson, CEO of Locust Walk, unpacks our 2023 Q2 Report: Global Trends in Biopharma Transactions Report. Each quarter, Locust Walk’s deal team compiles key statistics and trends showcasing what is happening in the global private and public capital markets, strategic partnering, and M&A.

To download this report, please go to and go to our “Insights” page. We are happy to speak with your team if you have questions about our views or if we can provide any perspective or guidance to your organization.


Deal Context: 1:12

Future Outlook: 6:00

Our Best Advice for the Current Market: 7:13


Welcome to Biotalk. My name is Geoff Meyerson, CEO and Co-founder of Locust Walk, and you are listening to Biotalk, our podcast for biotech deal makers.

This episode of Biotalk is focused on Locust Walk’s 2023 Second Quarter market conditions Report, in which we apply the latest data to analyze current activities in the biopharma deal landscape. Each quarter, Locust Walk’s deal team compiles key statistics and trends showcasing what is happening in the global private and public capital markets and strategic partnering and M&A activity.

Our report covers key takeaways for the sector across US, Europe and Asia geographies for a comprehensive view of biotech deal making. We invite you to review our report and hope you will find it useful in your business. To download this report, please go to and go to our “Insights” page. As always Locust Walk is happy to speak with you further if you have any questions about our views or if we can be helpful to guide your organization through the current market environment.

Deal Context, Quarter Highlights and Key Takeaways, and Future Outlook

In the next few minutes, I will provide dealmaking context, highlight events that have made a critical impact on the biotech industry, and provide our outlook for the future and our best advice on how you can survive as a biotech deal maker.

To provide deal context (Jumping right in)

  • Jumping right in, public markets have shown some signs of stabilization this quarter, with the XBI exhibiting a slight rebound, up by ~8% since the end of the first quarter
    • Nevertheless, this correction brings the XBI back to its position at the start of 2023, and it remains up only 9 percent over the last twelve months, underperforming the S&P  which has been up 16 percent over the same period
    • The number of companies trading below cash has come down from March (212 companies in March, compared to 165 companies in June), but the figure remains significantly elevated and we’ve largely retraced levels seen at the beginning of the year, which were high relative to historical trends
  • Additionally, the gradual revival of the XBI is driven by a chain of positive licensing deal flow this quarter, with average aggregate licensing deal value up 20% from Q1, to $705M
  • Notably this rise in deal value is accompanied by a 40% decline in deal volume, reflecting the shift towards fewer deals and larger bets
    • In contrast, the venture market which has favored later-stage assets, licensing deals indicate that partners are taking a longer-term view with significant investments in discovery/pre-clinical assets across modalities and indications. This might sound counterintuitive based upon things that we are hearing, but the data doesn’t lie and we are still finding early deals being done.
  • M&A dealmaking has been more moderate with an average deal size of $1.5B, which is less than half of the $3.9B in average deal size last from last quarter; keeping the value even this high is largely driven by the Merck / Prometheus deal, and without this deal, quarterly M&A would have fallen in line with the two lowest quarters for deal value in 2022 and average value. Importantly though, 20 deals were completed compared to 13 deals in the first quarter.  97% of all M&A value was for phase 2 and later indicating that early-stage M&A of material value is relatively rare and probably relegated to just mergers and small companies consolidating
  • Private financing, IPO and secondary offerings all remain below historical levels. There were two IPOs last week in July which has some hopeful for a recovery.  I’m skeptical that a new window will open.  Some companies might get public but the long line of IPOs who have not yet flipped public is unlikely to get out.  It is quite challenging to attract private or public investment in the current interest rate environment for pre-clinical companies with increasing access as the data increases
    • Total venture financing deal value this quarter remains in line with the low figures seen since the start of 2022, and sits at around half of the aggregate values seen thr   oughout 2021.
    • Furthermore, deal volume was in line with the prior quarter, but down 30% from the Q4 ’22 which represented the high point over the last 12 months
    • The IPO market remains largely shut for most biopharma companies, with a total of three IPOs this quarter, two US companies (Intensity Therapeutics and Acelyrin) and one European company (Oculis).
      • The follow-on market has also been challenging, with 75% of the companies completing secondaries raising less than $12M
    • Where financings have been successful, they have been later stage rounds focused on later-stage assets with clinical proof of concept
      • Series C investments saw the greatest growth this quarter, and financings for pre-clinical assets saw the greatest quarter-over-quarter decline with investors preferring clinical-stage companies with de-risked assets

Moving to the Europe and Asia Markets

  • Strategic partnership deals in Europe and Asia reflected conditions in the US, with low deal volumes (the smallest number of licensing agreements since 2020), but a large boost in deal values (Europe up 1.3x relative to Q1, Asia up 2.7x relative to Q1)
  • The European private markets look slightly more positive, with financing deal values and volumes continuing on an upward trajectory since its historical low in Q2 2022 ($684M 2Q23 vs $563M 1Q23 vs. $433M 4Q22), though deal volume is still significantly down relative to pre-pandemic levels.
  • The private markets in Japan were also relatively strong in Q2, with aggregate private deal value and deal volume both up from an all-time low in Q1

Future Outlook

  • So, what does this all mean and what is Locust Walk’s outlook
  • We believe that the recovery, while underway for companies with phase 2 clinical proof of concept data and beyond, will take at least another 12 to 18 months whereby there will need to be fewer companies trading below cash, fewer publicly traded biotech’s, and declining interest rates. This has been something I’ve shared for the past 18 months and continue to believe holds. Fundamentally the last 15 years of excess US government deficit spending and money printing cannot play itself out in just 2 years
  • When it comes to private financing, IPO and secondary offerings
    • There is a glimmer of life in the IPO market with bankers getting increasingly bullish. To be clear, some companies will get out but I would not classify this as a window. I think pre-clinical IPOs will be an anomaly. To expect otherwise would require public investors to forget the lessons they learned the past 2 years by investing so early
    • Pre-clinical private company will continue to struggle to raise capital unless it is a very interesting scientific story or best in class product with validated pharma interest

Our Best Advice for the Current Market

    • So, what is our best advice for the current market? Cash preservation and generation, by monetizing undercapitalized development programs, is key for companies of all stages given the challenges the industry continues to face in both the private and public markets
    • We’ve seen an uptick that is supported by the data from Asian based companies looking to license assets that bring innovation to their pipelines and access to the US and EU markets
    • Pre-POC private companies will likely need to rely on a combination of cash preservation and their existing investors to bridge the company to a more favorable financing environment. The number of investors that are required to be contacted plus the amount of time required to close the round have both increased dramatically. Plans need to be made accordingly
    • Both investors and management will need to be objective about whether the company can exist as an independent company and capture value where possible if the alternative is considering mergers or liquidation
    • As evidenced by the approvals we’ve seen this quarter (e.g. Lequembi which technically occurred at the beginning of Q3), innovation and drug approvals continue. So companies are and should continue to focus on the factors they can control like continuing to build great companies.  This is a financing challenge that is impacting how innovation is pursued.  The unmet need, ability of industry to meet that need and FDA’s willingness to approve therapies has not changed.  Eventually the macro economy will heal and companies need to do what they can to persist until then.

In conclusion, I want to thank everyone for listening to this episode of Biotalk. Please let us know what you thought and feel free to suggest potential topics for future episodes.  We look forward to a productive dialog and hope you tune in to our next podcast.  Please share with all your friends and colleagues so we can grow the audience.  This is Geoff Meyerson for Biotalk signing off.