Will the Capital Markets Open in 2025 for Life Sciences?

By Sandra Gardiner

For the past several years, life science executives and investors alike have been asking the same question: when will the capital markets fully reopen? 

After a challenging 2022–2023 cycle marked by inflation, rising interest rates, and geopolitical uncertainty, many hoped 2024 would bring a meaningful rebound. Instead, the year proved tepid, with pockets of activity but little broad-based recovery.

In 2025, the signs point to modest improvement, but it is still far from the record-setting highs of earlier in the decade. For life science companies, this means both opportunities and continued caution.

Modest Market Rebound

Compared to 2024, capital market activity is showing a measured uptick in 2025. Public offerings, secondary financings, and private placements are getting done, though volume remains well below historic peaks. Importantly, investor appetite for the sector has not evaporated. There is still significant interest in biotech and life sciences, but capital is flowing more selectively.

Rather than chasing early-stage innovation at all costs, investors are prioritizing companies with later-stage assets, clear regulatory pathways, and commercial strategies that feel executable. The market has shifted from “science at any price” to “science plus strategy.”

Investor Selectivity and Strategic Positioning

For executives, this shift underscores the importance of preparing a creative and compelling financing narrative. Investors are scrutinizing not only the quality of the pipeline but also the amount of capital required to reach the next significant inflection point.

Key questions on the minds of investors:

• How much runway will this raise provide? (and if you need tips on how to secure that runway, read this: How to Successfully Extend the Cash Runway to Growth in Life Science Companies)

• Does it get the company to a milestone that materially changes valuation?

• Will a financing overhang remain, creating uncertainty about the company’s ability to continue without raising significantly more capital in a short period of time?

Companies that can clearly articulate the capital required to reach pivotal milestones, showing discipline in operational execution, will be best positioned to capture investor attention.

Creative Deal Structures

One emerging trend in 2025 is the continued use of creative deal structures designed to align interests between issuers and investors. Pre-funded warrants are a prime example. These instruments are often priced at a premium to market with a nominal exercise price of a fraction of a penny. Because ownership is not calculated until the warrants are exercised, they provide investors with flexibility while giving companies immediate capital.

For companies, such structures can ease near-term financing pressure and provide optionality for investors. For investors, they represent a way to gain exposure to a company’s upside while managing risk.

These kinds of financing tools are becoming more common as both issuers and investors adapt to a market environment that rewards creativity and precision.

Growth-Focused Acquisitions

Another sign of evolving market dynamics is the type of M&A activity we’re seeing. Acquirers in 2025 are focusing less on immediate additive revenue streams and more on replenishing their pipelines for long-term growth. This trend reflects the strategic imperative for larger biopharma players to keep their innovation engines running in the face of patent cliffs and competitive pressure.

For smaller and mid-cap life sciences companies, this presents opportunity. Strong science, a differentiated pipeline, and a clear strategy may attract acquisition interest even before commercial revenues materialize. While M&A is never predictable, the focus on growth assets suggests that well-positioned companies could find themselves in strategic discussions earlier than expected.

Broader Market Headwinds

Despite these encouraging developments, the markets are not without headwinds. Tariffs, inflationary pressures, and uncertain global economic conditions remain front of mind for both investors and management teams. Geopolitical disruptions and supply chain complexities can still affect valuations and timing.

As a result, markets remain cautious. Capital is available, but not as easily attained and with heftier terms than just a few years ago.  Because of investor cautiousness, diligence is also more rigorous and taking longer to complete. There is significant competition for the same capital.

What This Means for Life Sciences Companies

The message for life sciences leaders is clear: while the markets are not yet “wide open,” they are opening slowly. The opportunity exists for well-prepared companies to raise capital, strike strategic deals, and position themselves for growth.

Preparation, however, is non-negotiable. Companies that succeed in this environment are those that:

• Build robust financial and operational capabilities.

• Align financing strategy with near-term and long-term milestones.

• Explore creative deal structures to meet capital requirements.

• Remain agile in the face of shifting global and economic conditions.

What’s the Outcome for Life Science Capital Markets?

The capital markets in 2025 are not the bull run many anticipated, but they are no longer frozen either. Activity is increasing, investor interest remains strong—albeit selective—and opportunities are emerging for companies that can tell a disciplined, well-structured story.

For CEOs, boards, and investors, the task now is to remain ready. The companies that invest in preparation today will be best positioned to execute when windows open, whether through financings, partnerships, or strategic transactions.

The message: the life sciences capital markets may not yet be fully reopened, but they are showing signs of life. And for those positioned to seize the moment, the remainder of 2025 could point to the beginning of a stronger cycle ahead.