The biopharma sector is operating in a fragile environment. While broader markets have rallied, biotech continues to face pressure from regulatory uncertainty, uneven investor appetite, and a sharply reduced flow of capital.
Auxilius’s Erin Warner Guill recently sat down with Sean MacGregor, Executive Director at JP Morgan covering life sciences investment banking, to get his take on current market conditions. Below are key themes from that discussion.
“It’s obviously a really tricky and fragile market right now that we’re sitting in amidst all the uncertainty and volatility that we’ve seen over the course of the last few months,” MacGregor said.
He noted that while the macro environment has improved, biotech faces specific headwinds. “Some of the key things that we’ve all been facing is obviously the changes at the FDA, the impact that that’s gonna have on clinical stage biotechs in terms of the regulatory pathway, the approval pathway, as well as trial designs and potential delays,” MacGregor explained. “We’ve also seen potential IRA reforms being proposed that would be a benefit to the sector and another theme is innovation coming out of China, with a lot of in-licensing by large pharma from companies building out new or follow-on assets there.”
“Investor sentiment has significantly improved over the last, I’d say, 30 to 60 days,” MacGregor said. “We’ve seen a number of public companies have some significant catalysts in the public markets in which the stocks have reacted favorably, those companies have been able to finance themselves, and have appreciated in the aftermarket as a result. That’s all signs of a positive and functioning market. But it’s not widespread. It’s some of the best companies with the best data sets that have been able to raise capital and fund themselves for the long term.”
He added that investors are gravitating to public companies over private ones because of liquidity and visibility: “Many of them are looking into the public markets for those opportunities as opposed to the private markets because of the liquidity in the public markets, as well as the ability to look for names that might have some type of arbitrage on value.”
MacGregor emphasized that investors are focused on companies with catalysts they can diligence this year. “Most investors are focused on those catalysts that are in the calendar year and less focused on what’s occurring in 2026, just given they don’t have to focus on those stories quite yet and there might be an opportunity to come into those stories in the early part of next year,” he said.
This focus has created a divide. “It’s opening up for those companies that have these key readouts that have access to capital and the ability to fund themselves through the next set of inflection points, but we’re also seeing companies on the other side who may have less access to capital and less near-term inflection points, and so it is difficult for them,” MacGregor explained.
“In this period of uncertainty, [investors] have the ability to be very particular and disciplined about those opportunities in which they want to deploy,” MacGregor said. “They’re funding very specific programs to specific inflection points, focused on how you’re going to de-risk the program or the company over this time period, and they’re focused on stories that have some de-risking from a target biology perspective, significant market opportunities, and the ability to demonstrate differentiation relative to competition.”
He added, “They’re looking for good stewards of capital right now…management teams that they feel like will be able to get the job done and execute, especially in an environment where things are very tricky from a regulatory perspective. If they cannot trust the management team to do so, that is when they’ll look to put their investment elsewhere.”
“I don’t think it’s quite over yet,” MacGregor said. “The pendulum hasn’t swung back in which there is significant access to capital. The cost of capital today is still really high. It takes a lot for companies to get themselves funded in today’s market environment.”
Even so, he pointed to some bright spots. “We have seen a significant uptick in M&A over the course of the last two months, which is obviously healthy,” he said. “Rate cuts we’re expecting in the second half of this year and some resolution on challenges like IRA tariffs and FDA cadence could hopefully bring more positive sentiment heading into 2026."
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