The HealthTech Biopharma Revolution: Hype or Here to Stay?

healthtech biopharma

Key Takeaways

  • In the last few years, the Biopharma sector has struggled with high interest rates, inflation, and the collapse of the pandemic-induced bubble, leading to the S&P Biotech ETF (XBI) hitting its lowest point since October 2018.
  • A subset of private Biopharma companies leveraging AI/ML and other advanced computational tools in drug development has gained a larger share of investment within the industry, showing resilience amid strong headwinds.
  • Computational approaches in HealthTech Biopharma hold the potential to unlock new scientific frontiers and accelerate drug discovery and development, promising substantial returns for both patients and investors.

There’s no sugarcoating how hard the Biopharma industry has been hit over the past two years.  

The sector – known for being high-risk and capital-intensive – has struggled with the high interest rate environment, inflationary pressures, and bursting of the pandemic-induced bubble, which saw frothy valuations, a saturated scientific landscape, and premature companies going public. In October, the S&P Biotech ETF (XBI) hit its lowest point since 2018, highlighting the industry’s struggles.

While Biopharma has rarely experienced the widespread investor enthusiasm or outsized returns of tech giants like Apple or Meta, the current bear market poses unique challenges for investors, executives, and employees who’ve enjoyed the sector’s boom over the past decade. Biopharma IPOs this year have been few and inconsistent, with many trading below their issue price.

Evaluating The Private Biopharma Universe

With everyone’s eyes on the blood in the public markets, it’s worth turning our attention to private Biopharma companies. This next wave of innovators in the sector includes established companies seeking better IPO conditions as well as emerging firms initiating their journey to deliver life-saving therapies to patients.

While the private markets face similar headwinds, one sliver of hope comes from a group of Biopharma companies harnessing the power of AI/ML and other advanced computational tools in their drug development process – a category Langar defines as “HealthTech Biopharma.”

Breakthroughs in data generation, computing power, and algorithms enable us to achieve the previously unimaginable, like predicting the 3D structure of nearly all known proteins on the planet. Forward-thinking companies leveraging such tools can unlock new science and drive R&D efficiencies through powerful computational platforms, ultimately yielding remarkable returns for patients and investors.

This article describes a meta-analysis by Langar Analytics comparing private HealthTech and non-HealthTech Biopharma companies to understand the current landscape, investment opportunities, and value generated by these distinct categories.       

HealthTech Biopharma, Defined

HealthTech Biopharma refers to pharmaceutical and biotechnology companies leveraging AI/ML and other advanced computational tools in drug discovery and development[i]. Biopharma companies, in this context, focus on in-house drug development and maintain an internal pipeline of candidates. This excludes CDMOs, CMOs, CROs, generics and biosimilar manufacturers, and companies developing R&D tools and diagnostics.

Langar’s Private Biopharma Universe encompasses both HealthTech and non-HealthTech companies that meet two key criteria:

  1. Their primary headquarters are in the US
  2. They have raised a minimum of $50 million in equity since January 1, 2019, with at least $10 million secured in a single funding round.

The Big Picture

Langar utilized its classification taxonomy to analyze all HealthTech and non-HealthTech Biopharma VC deals since Q1 2019 (Figure 1). The outcomes highlight the industry’s striking volatility in recent years, culminating in the harsh winter we face today. Predictably, the data shows a surge in VC funding and deal activity during the pandemic, fuelled by the enthusiasm of generalist investors who recognized the sector’s potential and its pivotal role in responding to COVID-19. Since early 2022, however, Biopharma has ceased to be the hot sector for investment, resulting in a consistent decline in both VC dollars and deals.

VC funding for the first three quarters of 2023 amounted to $9.4B, comparable to the $8.5B recorded for the same period in 2019[ii]. However, the number of deals has decreased from 137 to 98, indicating that specialist investors favor fewer but larger deals. As companies face difficulties traversing the “valley of death” amid formidable headwinds, VC firms are leaning towards strengthening their existing portfolio companies over funding new startups. This shift in strategy reflects the industry’s risk-averse approach in the current climate.

While Figure 1 illustrates that HealthTech Biopharma companies are not immune to the industry’s ups and downs, a more intriguing insight emerges when examining the annual breakdown of dollars and deals (Table 1). Despite the overall decline in VC funding since 2022, the percentage of total investment allocated to HealthTech companies has consistently risen every year since 2020, a trend mirrored in the number of deals as well.

An analysis of average deal sizes echoes the story of investor enthusiasm in this space (Table 2). After the frothy valuations and massive deals of 2021, both HealthTech and non-HealthTech Biopharma saw a dip in average deal size in 2022, followed by a strong rebound this year that surpasses 2021 levels, albeit over fewer deals, as indicated in Table 1.

Notably, HealthTech companies have consistently maintained a larger deal size than non-HealthTech counterparts since 2019, reflecting their relative ease in fundraising, ability to command higher valuations, and stronger capitalization. However, it’s essential to acknowledge that raising cash remains a challenge for all players in the current landscape.

Tables 1 and 2 emphasize investors’ growing recognition of HealthTech companies leveraging advanced computation to pursue novel science, expedite drug development, and increase the probability of getting therapies from bench to bedside.

Zooming Into 2023

Table 3 details the average deal size and volume for HealthTech and non-HealthTech companies in the first three quarters of 2023. Deal volume has unsurprisingly been down-trending for both categories since the start of the year, reflecting the challenging environment. However, deal size has steadily increased, indicating investor confidence in value-generating ventures. This aligns with the data presented in Figure 1 as well.

Step-ups – a measure of a company’s valuation change between different funding rounds – have been relatively modest for HealthTech and non-HealthTech firms in the first three quarters of 2023 (Figures 2A and 2B). While a few deals exceeded 2x step-ups, the average step-up for both categories is 1.4x, highlighting the shift towards more realistic valuations.

The takeaway is that investors are leveraging their power and becoming more discerning when evaluating their portfolio companies’ commercial potential and growth prospects. It’s worth noting that down rounds have been relatively limited as private companies explore non-dilutive capital-raising methods like strategic partnerships and venture debt or extend their financial runways by reducing costs.

The Future of HealthTech & Non-HealthTech Biopharma


While private HealthTech Biopharma companies are not impervious to the present challenges faced by the sector, the data illustrates that they are a bright spot in these dark times. The growing share of investment inflow and deal volume, along with considerably larger deal sizes in 2023, signals that these companies possess a more robust financial footing and are better equipped to weather the downturn.

Nonetheless, the continued bear market will mean tougher times for both private HealthTech and non-HealthTech Biopharma companies in the new year. To make things worse, 2024 throws in a looming recession, IRA drug pricing negotiations, the presidential election, and uncertainty about the Fed’s interest rate policies. That being said, with the current excitement around the HealthTech space and the AI hype cycle we find ourselves in, we expect larger deal sizes to persist for such companies with compelling, de-risked science, robust data, and experienced management teams (the same holds for non-HealthTech companies).

Indeed, several specialist VCs, including OrbiMed and Sofinnova Partners, recently raised mega-funds, suggesting plenty of dry powder in the private markets for companies that fit this profile. Conversely, 2024 will see more companies pursuing incremental science without a clear value proposition wind down as they struggle to raise cash, though a few promising ones may inadvertently become collateral damage.

Growth of AI/ML in Biopharma

Growing evidence of the potential of advanced computational tools coupled with their decreasing costs leads us to anticipate a surge in their adoption across the industry. As integrating such tools becomes increasingly essential to secure future financing, some companies may tout their use of AI/ML and other next-generation capabilities more than others, making it necessary for diligent investors to distinguish substance from mere hype.

Partnerships & IPOs

Forging innovative HealthTech Biopharma partnerships and expanding existing ones like the $1.5B collaboration between Recursion Pharmaceuticals and Bayer was a hallmark of 2023. We expect to see more of these as prominent players harness the computational platforms of HealthTech firms to expand into new indications and modalities cost-effectively. As AI/ML takes on a larger role in drug discovery, we foresee Big Tech, which has already made strides in the healthcare sector, expanding its footprint in Biopharma to unlock new customer segments and sustain its remarkable growth in 2024.

Biopharma IPOs will likely remain subdued for the first half of 2024 as most mature private companies await market improvements. In contrast, 2024 will continue to offer strategic M&A prospects for Big Pharma and large Biotech organizations. While intriguing private companies remain in consideration, opportunities in the public markets are likely more enticing, much like in 2023, due to the abundance of late-clinical and commercial-stage firms with depressed valuations, many trading below cash.

The recent XBI rally, mostly driven by positive macroeconomic indicators, has reignited debate about whether Biopharma has emerged from rock bottom. Despite the uncertainty, we remain optimistic that improved resource allocation, focus on promising programs, and recalibrated valuations stemming from this necessary course correction can steer the industry toward a comeback in the second half of 2024.


Amid the current Biopharma winter, it’s easy to forget that we’re in a golden age of science, propelled forward by transformative computational technologies.

While previous tech-driven hype cycles have had limited impact on the complex drug development engine, the present era stands apart. Breakthroughs in large-scale, high-quality data generation, enhanced computing power, and sophisticated algorithms put us in a better position to deliver life-saving therapies to the right patients precisely when needed.

HealthTech Biopharma companies operating at the intersection of science and technology are at the forefront of this revolution. Although we must acknowledge that change won’t happen overnight, especially in a sector where patient lives are at stake, this category is poised to grow significantly in the coming years. We’ve already seen a HealthTech company like Moderna become a household name overnight thanks to its development of an mRNA Covid vaccine. If other HealthTech Biopharma companies realize their potential, we may witness the emergence of a few more trailblazers in this field.


[i] These tools can optimize various aspects of drug discovery and development, such as target identification, lead optimization, and identification of biomarkers and patient subgroups, depending on their specific capabilities.

[ii] While the Biopharma ecosystem is by no means strongly positioned, comparing 2023 to the exaggerated peaks of 2021 will only make the situation seem more dire than it is. In fact, 2019 could be a suitable comparison since the Biopharma industry was coming off a banner year in 2018, although nowhere near record-breaking pandemic highs. Even with the ongoing turbulence, reverting to pre-pandemic levels signifies a comeback to a market with significant capital compared to historical levels observed over the past decade.

Areesha Saif
Areesha Saif

Areesha is a Biopharma consultant supporting pharmaceutical and biotech companies with corporate strategy, product commercialization, and market expansion. She is deeply passionate about all things biotech and is particularly interested in the intersection of science and business. She earned her Bachelor's and Master's degrees in chemistry from the University of Cambridge and currently resides in Chicago.

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