4 Takeaways From the 43rd Annual J.P. Morgan Healthcare Conference

After two years of a relatively lackluster funding environment in the life sciences and biotech sectors, we were eager to kick off the new year with our annual visit to San Francisco for the 43rd Annual J.P. Morgan Healthcare Conference (#JPM2025). As a registered investment advisor and an advisor on venture debt financing for life sciences and biotech companies, we were interested to hear a recap of 2024 from venture lenders and get their outlook for 2025. Here’s a summary of what we heard:

Mixed Reviews on 2024

Some venture lenders noted that 2024, especially the second half, provided a flurry of deal flow. Others remarked that while 2024 was a year of fewer new deals, it allowed them to provide some TLC to their existing portfolios.

A Muted Outlook

Overall, the outlook for 2025 seems optimistic but guarded. Of course, most years we all pile into San Francisco brimming with optimism for the year to come. As we look ahead into 2025, the crystal ball is very murky. We will need to see evidence of exits in the form of M&A and IPOs before the possibility of earlier stage equity financings opens up again. The lender quandary for now seems to be that we are squarely in an age of “haves” and “have-nots.” The “haves” may raise significant rounds – often in the hundreds of millions – while the “have nots” may be struggling to fund operations. The former often have no need for debt financing while the latter may pose too much risk for lenders. So, the question is, what is the solution?

Looking Later Stage

Many lenders now seem to be seeking to de-risk portfolios by lending to companies that are later stage and have commercial assets. According to Pitchbook, late-stage VC and venture growth deals accounted for more than 90% of all venture lending in 2024. This makes sense in most cases since later-stage deals are generally larger financings, however, this is a stark contrast from a year earlier when the same categories made up 80% of total venture lending. And it was just 72% in 2022. The historical average in the years’ prior (2014-2021) was 67%.*

*Source: Pitchbook Venture Monitor Report

UK and EU Beckons

Venture debt appears to be maturing in the UK and EU. More US based lenders are looking “over the pond” for opportunities. Factors that can add to the complexity, however, are where the IP is domiciled, country laws regarding liens, and currency/FX issues, to name a few. US subsidiaries that can borrow on behalf of the overseas parent may help alleviate many of these potential issues.

Conclusion

As with the equity markets, lenders are in a little bit of a holding pattern heading into 2025. Many are eager to put funds to work but tend to be more selective from a credit perspective than in years’ past. Those companies with later-stage assets (late PhII or beyond), solid investors or strong market caps and decent cash life will likely fare better than those seeking to bridge to the next valuation inflection point. It is a fact that hope and debt make for poor dance partners.