On June 24th, Gilmartin Group’s Founder, Lynn Lewis, and Principal, Kiki Patel, PharmD moderated a discussion with the Jefferies Investment Banking team including Bryan Czyzewski, Managing Director of Investment Banking and Jack Fabbri, Managing Director of Equity Capital Markets, who bring deep expertise at the intersection of biotech innovation and capital markets. They addressed capital raising strategies in a risk-off market, sharing real-world financing strategies and exploring how management teams can build the optimal toolbox to implement actionable approaches that enable them not only to survive but to thrive amidst the squeeze.
Resilience and Realism: Biotech’s Path Through Market Uncertainty
Biotech innovation continues to advance despite capital market challenges, with scientific breakthroughs, clinical progress, and commercialization efforts moving forward amid rising interest rates, regulatory ambiguity, and global macroeconomic shifts. In this environment, understanding how deals are getting done and exploring the full range of financing options is more important than ever. Investors still have capital to deploy but are increasingly selective, favoring later-stage, revenue-generating companies with validated data and downside protection. Early-stage companies face heightened scrutiny and must clearly demonstrate clinical or strategic value to secure funding. At the same time, pressure on large pharma to replenish pipelines as key patents expire is sustaining demand for innovation, helping to support capital inflows into the sector.
Creative Financing Strategies: Biotech’s Evolving Toolbox for Navigating Market Challenges
As capital markets remain constrained, biotech companies are increasingly turning to creative financing strategies to fund operations and advance pipelines.
1. Catalyst-driven financings
There’s been a notable rise in catalyst-driven financings, where companies align capital raises with major data announcements or corporate milestones. Over half of follow-on financings this year have followed this model, with many executed concurrently launched the same day as the news. These “breakfast launches” or PIPE-like deals often involve pre-market data releases, rapid pricing, and same-day trading. This structure allows companies to engage with select investors in advance via wall-crossing, providing more control over the investor mix and helping to avoid the perception of a prolonged financing overhang.
2. At-the-Market offerings (ATMs)
ATMs have become an increasingly popular tool, at times comprising nearly half of all biotech financings. Their key advantage is flexibility: companies can raise capital incrementally at prevailing market prices without undertaking a large, marketed transaction. This makes ATMs especially effective in response to reverse inquiries or opportunistic market windows.
3. Convertible Debt & Royalty Monetization
Convertible debt remains a favored option for companies nearing or generating revenue, offering a way to defer equity dilution while accessing capital. These instruments are well-suited for CFOs and CEOs managing financing in volatile conditions. Meanwhile, royalty monetization is gaining traction as an alternative route to unlock asset value, most recently highlighted by Revolution Medicines’ deal on June 23, 2025. Though technically dilutive, these deals shift the impact away from immediate equity issuance and instead affect the P&L or balance sheet, providing a more strategic and less immediate form of dilution.
Why Debt isn’t the Answer for Biotech’s Cash Crunch
In today’s market, debt is rarely a practical financing option for biotech companies especially early-stage ones. The high-risk nature of drug development and low success rates make traditional lenders cautious, leaving equity as the preferred path for most. While later-stage companies with near-term catalysts may access debt in limited cases, it typically only works when there’s strong management conviction, a clear milestone path, and favorable structure. With cash reserves shrinking and capital scarce, debt alone won’t close the funding gap. Instead, companies must consider all options including non-dilutive capital and sometimes accept imperfect equity raises to reach critical milestones and preserve long-term viability.
Insiders Can’t Do It Alone: Attracting Fresh Capital
Insider support is often key in IPOs especially in a muted market but launching without coverage from existing investors or new ones identified through testing the waters is tough. In follow-ons, that support still matters, but won’t carry a deal alone. Nearly 40% of public biotechs were trading below $25M in enterprise value as of March and April, making it unrealistic to expect existing investors to back every deal. While signals like reverse inquiries or large insider participation are helpful, they’re not enough to close a transaction. Companies need to stay visible, engage new investors early, and use IR strategically to be ready when the time comes.
Money is Green: Unlocking International Capital
Sovereign wealth funds and global family offices offer deep pockets and long-term capital, but accessing that funding comes with tradeoffs. These groups are often generalists with slower decision-making processes, making them less suited for fast-moving transactions like overnight deals. They may also be out of step with current biotech market conditions, holding valuation expectations that can delay or derail financings. Many (especially in Europe) prefer larger market cap companies often $1B+ and require specific liquidity thresholds or lengthy internal approvals, putting smaller-cap biotechs at a disadvantage. Still, given the current funding landscape, no source of capital should be overlooked in a thoughtful investor relations or capital-raising strategy.
M&A Momentum in 2025: As LOE Squeezes Pipelines, Innovation Demand Rises and China Offers a New Frontier for Pharma Deals
With many companies off their 52-week highs and the cost of capital climbing, management teams are increasingly weighing the path to development and commercialization against strategic alternatives. Recent high-profile acquisitions by Big Pharma highlight a growing appetite for innovation, driven in large part by looming loss of exclusivity (LOE) and the urgent need to replace revenue. As the IPO market remains challenging, expect continued momentum in M&A activity especially cross-border transactions fueled by China’s expanding innovation engine and appetite for global partnerships.
Zombie Biotechs: Time to Wake Up or Wind Down
Biotechs trading below cash are under increasing scrutiny for continuing operations without meaningful pipeline progress. When lead programs fail and few viable assets remain, management teams acting as fiduciaries must evaluate strategic options such as in-licensing, pursuing a reverse merger, or returning capital to shareholders. Several companies have navigated this process in an orderly manner, avoiding boardroom conflict, but investor involvement is intensifying. Shareholders are more frequently building positions and pushing for capital returns when they believe the process is stalled or misaligned. As a result, return-of-capital discussions are becoming a more routine and expected check on corporate strategy in today’s market.
Valuation Blues: Is Consolidation a Cure or a Crutch?
Valuations have generally come down due to a tough macroeconomic environment and liquidity concerns. While some biotechs may not secure funding, losing one company doesn’t necessarily boost the value of others. The health of the biotech sector depends more on positive data, M&A activity, returning capital to shareholders, and favorable regulatory or policy developments than on consolidation. Though consolidation can happen naturally where there are pipeline overlaps or synergies, biotech remains a numbers game: having more companies means more chances for success. That said, the sector is still experiencing a hangover from the COVID funding surge, where many ideas and companies were launched without strong product potential. In short, consolidation alone isn’t the key to resetting valuations or improving the overall health of biotech.
The Return of the IPO Market
A healthy IPO market is vital to broader capital markets, and there remains a solid backlog of companies eager to go public. While it’s difficult to predict whether the window opens in 3, 6, or 12 months, it will open and the key is to be ready. Companies should stay current on audits, maintain strong corporate governance, and prepare materials like a draft box summary to shorten the IPO timeline. You don’t need a full S-1, but early prep can cut filing time in half and allow for confidential submissions and testing the waters. Engaging advisors helps refine strategy as market dynamics shift, and IR firms play a critical role in keeping companies visible through conferences and proactive investor engagement. A differentiated story and consistent investor touchpoints will be essential when the opportunity returns.
Biotech companies must take a holistic approach to managing their capital structure, carefully balancing dilution with the timing of financings around key value-driving milestones. In this industry, data serves as the essential currency that drives investor interest and builds long-term value. However, successfully communicating this value and timing capital raises requires deep market knowledge and strong investor relationships. This is where experienced investor relations firms prove invaluable in helping management teams navigate funding decisions, optimize timing, and build compelling equity narratives that resonate in a complex and competitive market.
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Authored by: Rachna Udasi (Associate) & Kiki Patel, PharmD (Principal), Gilmartin Group