Hundreds of well-funded startups wait for exits, while big pharma, tools providers, and consolidators stand to gain from scarcity and policy shifts.
INSIDE TODAY’S MARKETS
Biotech was one of the biggest winners of the 2020–22 funding boom. Billions poured into startups chasing new therapies, sequencing tools, and agtech breakthroughs. But today, much of that capital is stuck in companies that haven’t raised in years. The IPO market is frozen, venture appetite has cooled, and late-stage names are running lean while they wait for the next upcycle. The backlog now reshapes not just venture portfolios, but also public markets, M&A pipelines, and even trade policy dynamics.
DEEP DIVE
Biotech’s Backlog: Too Much Money, Too Little Liquidity
The biotech boom years (2020–2022) left behind an unusually large cohort of well-funded private companies that haven’t raised since. Crunchbase data shows over 200 U.S. biotechs with $50 million or more in prior capital haven’t closed a round in 3–5 years. Together they’ve raised nearly $18 billion — roughly equal to all the venture money flowing into the sector this year.
That backlog includes at least 15 unicorns. High-profile examples:
Insitro: $643 million raised through 2021, but no new financing since. Workforce cuts this spring extend the runway into 2027.
Pivot Bio: $430 million Series D in 2021, now relocating operations to the Midwest while keeping job postings active.
Ultima Genomics: $300 million launch in 2022, hasn’t raised since but continues to announce partnerships.
Late-stage dollars have evaporated. Of the ~$17 billion raised by U.S. biotechs in 2025, roughly half went to seed and early-stage startups. That leaves legacy unicorns stranded between the private and public markets. During the 2020–22 peak, IPOs absorbed many of these names. Today, the IPO window is closed, and M&A volumes remain muted.
The result is a long list of companies quietly living off their last mega-rounds, running leaner, and hoping capital markets reopen before cash runs dry. Some will survive into the next upcycle; others will be forced into fire-sale acquisitions or collapse outright.
The backlog is not all bad news. Once biotech IPO activity revives, the pipeline of candidates will be unusually full. Similarly, big pharma balance sheets are flush, and acquisitive interest could rise as valuations reset. But the near term is unforgiving. The 2020–22 era of “fund now, figure out later” has given way to a market that demands clinical progress, cost discipline, and credible paths to commercialization.
PUBLIC MARKET READ-THROUGH
The biotech funding freeze doesn’t just weigh on startups — it reshapes opportunity in listed equities.
Big pharma’s M&A optionality: Pfizer, Merck, and Amgen sit on large cash balances and face looming patent cliffs. A crowded pool of late-stage private biotechs with limited liquidity is ripe for discounted takeouts.
Biotech ETFs feel the drought: Funds like XBI (SPDR S&P Biotech ETF) and IBB (iShares Biotech ETF) remain highly correlated to deal activity. Without IPO inflows, performance is increasingly volatile.
Tools and CDMOs benefit: Thermo Fisher and Danaher provide sequencing and contract services that still draw on capital raised in prior years. Even if financings stall, spend from those boom-era war chests continues to flow through their pipelines.
Valuation reset = opportunity: Public midcap biotechs are already trading at steep discounts. With private peers starved of capital, listed players with cash may emerge as consolidators themselves.
TARIFFS TURN THE SCREW
Trade policy adds another layer of pressure. Pharma tariffs raise the cost of imported APIs and lab inputs, forcing cash-strapped startups to stretch runways even further. Supply chains are slowly rerouting, with U.S. and European manufacturers poised to win share.
For large public companies, tariffs can be absorbed. They own diversified operations and can pass costs through. For late-stage private biotechs, tariffs compound the funding drought, further tilting the balance of power toward big pharma and listed consolidators.
THE SIGNAL
The biotech sector’s backlog is a test of patience. Private investors face a long wait for exits, while public markets become the battleground where survivors and acquirers meet. Tariffs amplify the divide, strengthening incumbents at the expense of smaller challengers.
For investors, the message is clear. Expect more binary outcomes, more volatility in biotech ETFs, and a steady drumbeat of M&A as cash-rich pharma shops for discounted innovation. The opportunity isn’t in chasing every new name — it’s in owning the platforms and consolidators that can thrive while others wait.
