A recent Financial Times article, authored by Hugh Rienhoff, highlights a rising challenge for America’s life sciences ecosystem: as biotechnology fundraising has declined, venture capital (VC) investors are increasingly prioritizing later-stage drug candidates that offer the prospect of faster returns.
That shift means there are fewer resources available for the earliest – and riskiest – stages of scientific discovery. This shift also raises the importance of mergers and acquisitions (M&A), which provide a critical incentive for VC investors by allowing them to recover their investments in early-stage companies.
Early-Stage Innovation Depends on Long-Term Capital. Developing a new medicine is a lengthy, costly and highly uncertain endeavor. Early-stage life sciences companies often rely on VC to fund the translation of promising science at academic laboratories into potential treatments through preclinical and clinical development.
But the funding environment has become increasingly difficult:
- Annual biotech venture fundraising declined from a peak of $152.3 billion in 2018 to just $12 billion in 2024.
- Early-stage deals fell from 43% of biopharma venture activity to 32% in 2025.
- Investments are increasingly being directed toward clinically mature assets and experienced management teams – not initial scientific discoveries.
As Rienhoff notes, moving discoveries from academia into industry requires “capital, imagination and optimism.” A predictable M&A environment helps sustain all three.
M&A Helps Make Long-Term Investment and Innovation Possible. A healthy life sciences M&A environment can help encourage investment in early-stage scientific discoveries. When M&A is a predictable, reliable exit point, investors gain confidence to support bold ideas over the long timelines required for drug development.
Beyond acting as a critical investment incentive, M&A helps ensure the medicines of tomorrow reach patients. As often happens in the life sciences, early-stage innovators contribute specialized scientific knowledge and promising drug candidates, while established companies may provide the capital, clinical-development experience, regulatory experience and global infrastructure needed to bring medicines to patients. M&A serves as the bridge that connects these complementary skillsets, resources and infrastructure, at the right time, to bring new medicines to patients.
A Strong Investment Landscape Supports U.S. Life Sciences Leadership. The stakes extend beyond individual companies or treatments. Global competition in the life sciences is increasing significantly, as a growing share of new drug candidates are originating overseas. To preserve America’s leadership, the U.S. must remain the best place to finance, develop and advance breakthrough science.
That requires a life sciences ecosystem in which early-stage risk-taking is rewarded and companies can pursue pro-competitive partnerships and M&A based on what gives a promising medicine its best chance of success.
The Path Forward. Policymakers should provide clear, consistent and balanced merger enforcement that protects competition while recognizing the role pro-competitive M&A plays in sustaining investment.