Summarize this content to 2000 words in 6 paragraphs in Arabic Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.It was winner-takes-all in biotech investing in 2024. Larger funds attracted an outsize share of the available investment cash. While many companies struggled, dozens raised at least $100mn. Much of the excitement was generated by red-hot sectors. In late April San Francisco-based artificial intelligence drug discovery start-up Xaira announced it had raised $1bn in one of biotech’s biggest-ever launches. New York-based weight loss start-up Metsera brought in more than $500mn in funding in seven months.The market is increasingly driven by fewer, deep-pocketed investors, often working with a relatively small number of like-minded investors and fund managers. Among the high-flying funds are Flagship Pioneering, the investor behind vaccine company Moderna, which raised $3.6bn in July. In October, Netherlands-based Forbion raised $2.2bn across its two newest funds. But many in the sector are struggling. The post-pandemic rise in interest rates, which damped the appeal of risky, long-term bets, prompted a severe shake-out. Even after a rise of about 40 per cent since late October 2023, the S&P Biotechnology Select Industry index is more than 50 per cent below its 2021 high. More than one in four US healthcare companies raising at least $15mn of new funds reported a flat or down round in the first half of 2024, according to Silicon Valley Bank. The deployment of funds has been affected by delayed distributions to investors from existing funds. That reflects continuing difficulties in cashing investments, despite a pick-up in initial public offerings and some high-profile acquisitions. Danish biotech Genmab’s $1.8bn acquisition of US-Chinese cancer drugmaker ProfoundBio is one example.Big Pharma has deep pockets but it is choosy about acquisition targets. Buyers want evidence of drugs’ effectiveness and clinical differentiation. That is extending the period for which companies need funding. That is a reason why funds are writing bigger cheques, freeing up investee companies from the treadmill of constant fundraising.But this trend can divert funding away from early stage firms. The problem is particularly acute in the UK, where many investors have shifted to later-stage deals, according to Roel Bulthuis, managing partner at FTSE 250 life sciences investment trust Syncona.Across Europe, there is a long-standing mismatch between scientific prowess and the capital to exploit it. Legal and cultural barriers limit the international flow of funds. The scarcity of capital means valuations are on average 40 per cent lower in Europe than in the US, according to Forbion managing partner Sander Slootweg. That gap is typically closed when the company is floated or sold, boosting profits for VC firms. The appetite for biotech bets will pick up with falling interest rates. But the uneven distribution of funding and rewards looks set to persist.vanessa.houlder@ft.com
