Life Sciences Funding in View: 2025 Outlook

2025 Outlook United States

• While more capital flowed to the life sciences sector in 2024, CRE fundamentals softened further. A more robust uptick in flows, both in the public and private space, is needed to begin firming up some of the vacancy challenges in many markets. Entering 2025, investor sentiment is more positive with expectations of lower interest rates and regulatory changes that could improve the business climate. While 2025 is expected to be a year of growth, the CRE recovery will likely lag as markets work their way through large blocks of vacant space. • VC funding: In 2024, megadeals dominated the landscape as the number of deals over $100 million surged. Investors showed their confidence by writing larger checks; however, strong clinical trials and healthy financials are expected. Early 2025 shows a continuation of this trend, with at least seven $100 million-plus deals announced in the first two weeks of January, indicating that investors will continue to make significant bets on companies that show strong fundamentals. As these companies secure subsequent funding rounds and bolster their capitalization, leasing activity in key markets should tick up. • IPO Market: After a lackluster year for IPO activity following an exuberant start, 2025 has begun on a subdued note. Many companies are still preparing offerings, and IPO activity for the year will depend on stock market sentiment. A more favorable business environment could drive an uptick in IPOs later in the year. Some things to consider in 2025 include:

• Further interest rate cuts: Interest rates will be more favorable in 2025, with the Fed signaling that cuts in the second half of the year will be stronger than the first. Life sciences companies should expect debt to be slightly more cost effective in 2025, with additional relief expected in 2026. acquisitions of biotech companies in 2025. Adding innovative companies with in-demand therapies to their pipeline will be paramount, as the clock continues to tick on the patent cliff. The recently announced blockbuster J&J-Inter-Cellular deal has injected enthusiasm into the sector, but it may not be indicative of activity throughout the year. Nevertheless, 2025 is expected to be an up year for M&A. • CRE fundamentals will remain challenged: The life sciences new development pipeline has significantly pulled back, giving the sector some breathing room. As leasing activity picks up, new vacant space in the market will be absorbed. Occupiers will face a favorable market in 2025, with ample high-quality, highly amenitized space available. • M&A: Pharma companies are expected to continue their strategic

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LIFE SCIENCES JANUARY 2025