So far this year, just 16 funded U.S. startups in the biotech, drug discovery and medical device spaces have made their debuts on or the , per Crunchbase data. That puts 2025 on track to deliver the lowest number of biotech IPOs in years, as charted below.

The sluggish IPO pace is one of several indicators that investors are growing more risk-averse toward biotech and medtech. Many of the are administration-induced. These include cuts to public research funding, leadership upheaval at the and public health agencies, and questions around future drug pricing policy.

Venture investment in the space hasn’t fallen off a cliff, but it has dropped considerably. Per Crunchbase data, biotech, pharma and medical device startups pulled in just over $16 billion in seed- through growth-stage financing so far in 2025. That’s a 25% decline from the same period last year.

Moreover, as charted below, we’re still nowhere near the peaks scaled a few years ago.

IPOs may be scarcer, but they’re bigger

Back in IPO-land, meanwhile, the picture isn’t entirely discouraging. While the number of new market entrants has gone down, their average public market valuation has risen over the past couple of years. Billion-dollar-plus debuts — once uncommon in the space — accounted for a quarter of IPOs this year.

So far, 2025 has also brought one unusually large debut, from , an AI-enabled precision medicine company with oncology as a core focus. Irving, Texas-based Caris went public in July and recently had a market cap around $9 billion.

, a developer of hormone therapies for obesity and related conditions, also made a splashy entry in late January. The New York startup, founded just three years ago, was recently valued on Nasdaq at around $3.3 billion.

And most recently, , a heavily venture-funded developer of technology for diagnosing and managing coronary artery diseases, made its Nasdaq debut Tuesday, securing an initial market cap around $2.4 billion.

But although well-received, larger debuts do look bullish for the space, historically small and mid-sized offerings also play a big role in maintaining the health of the biotech startup ecosystem. For companies looking to fund costly R&D and clinical trials in particular, the IPO market has long provided a crucial source of capital.

A case for optimism?

One potential upside of the current investment environment, for some at least, is the potential for deals.

That’s the outlook from , a partner at focused on early-stage biotech.

He recently : “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.”

Booth’s reasoning is that because there are fewer startups being created today, there’s far less competition for resources and talent.

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The company is looking to raise its Series A to fund the trial, an expensive endeavor that will likely take years to prove to the it’s superior to other drugs currently on the market. Only around 25% of drugs make it past phase 3.��

“I think the hardest part of this is being a small company,” said , CEO of RSF Bio, as the company is also known. “Doing a phase 3 really makes you a bigger company just with the amount of money you have to raise. It is what it is.”

Pharma companies usually partner with startups to drive them through clinical trials, but large pharmaceutical organizations have been laying low since the funding downturn. In 2022, merger and acquisition activity in the space was the lowest it had been since 2013, according to . Partnerships, through which pharmaceutical companies fund the development of drugs and commercialize them themselves, was the lowest it had been since 2018. , funding in 2022 was as low as it was in 2020.

“In the downturn, we have a situation where a lot of people would be happy to partner around whatever assets or platforms they have,” said , CEO of . “Beggars can’t be choosers.”

The lack of activity has only strengthened Big Pharma’s place in the biotech ecosystem, and is creating waves across the delicate innovation pipeline. Without being able to scrounge up venture funding or develop strong partnerships, startups are stagnant.

“Without a shadow of a doubt, these are testing times for nurturing and fast-tracking innovation in the sector,” said from consulting firm .��

Startups’ relationship with Big Pharma

It is, in a sense, somewhat surprising that partnership and acquisition activity has been so low. Without large research and development arms themselves, large pharma companies rely on smaller startups to discover and develop new drugs, which they later buy to commercialize, market and patent.

“The biotech companies are bringing innovative assets, which pharmaceutical companies need,” said Mike Ward, an analyst at Clarivate. “For pharmaceutical companies, it’s important that the biotech companies are robust and are going to be around.”

As drug patents expire to make way for generics, pharma companies are constantly on the hunt for new assets to make them money. But funding pharmaceuticals is an expensive and risky business.��

Pharma companies often partner with startups early to develop drugs created out of an already-tested platform, but that comes with regulatory and development risks. They might otherwise acquire those de-risked drugs late in the process at a higher cost.

Last year, Orna Therapeutics announced a partnership with . Merck paid the company $150 million upfront and could pay up to an additional $3.5 billion if Orna successfully develops a handful of vaccines and therapeutics. Xanax, the EpiPen and Concerta have all been developed through a web of partnerships and Big Pharma acquisitions.

Berholtz has talked to large pharma companies before. But by entering phase 3, the company’s drug is more valuable than it has ever been, because it’s less risky and more likely to get the stamp of approval from the FDA.��

“We have had some Big Pharma saying, ‘Well, why don’t you de-risk it a little more? And then we know there’s going to be a New Drug Application, then come and talk to us,’” Berholtz said. “Because Big Pharma has the commercialization, sales and marketing teams.”

Who gets Big Pharma partnerships?

RSF Bio is in what Young calls “no man’s land” in biotech — that phase in a drug’s lifecycle where the startup often has to front the cost of developing the drug and pushing it through regulatory approval at little risk to the pharma company that acquires it.��

“[Pharma companies] have bifurcated, either very early or incredibly, incredibly late,” Young said. “And that’s kind of created this gulf in the middle. …This is where a lot of promising assets, with their associated risks, go to die.”

It’s not easy to scrounge up a partnership deal with Big Pharma. Many of these companies are struggling in the public markets, so they’re focused on very specific, bread-and-butter pipeline drugs that leave a lot of innovative companies out of their scope.��

“When the deals get done, it’s more of a window into what the pharma is thinking,” said Barnes. “It’s less of a marker for how persuasive the biotech has been in persuading them to do something.”

Midsize to small pharma companies are also suffering on the public markets, and their lower market capitalizations make it harder to fund biotech innovation through partnerships.

“The public markets are closed and the private markets are tough,” Berholtz said. “I would think that the dynamic in that collaborative process has shifted in favor of the pharma companies.”

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