In a year when investors were hesitant to loosen their purse strings, one sector of the healthcare industry stood out for bringing in the big bucks: biopharma companies that focus on artificial intelligence (AI).
Investors put $5.6 billion into such companies, which develop drugs made of biological sources like vaccines, in 2024—a more than 300% increase from 2023 when the figure stood at $1.8 billion, according to a Jan. 7 analysis from Silicon Valley Bank (SVB). The biopharma sector overall collected 52% ($21.2 billion) of all investment dollars put into the US healthcare sector in 2024, the report found.
“We’re seeing a lot more dollars being flowed into the industry and into the market,” Ashkan Afkhami, managing director and senior partner in Boston Consulting Group’s (BCG) healthcare practice (who was not involved in creating SVB’s analysis), told Healthcare Brew.
But why? AI has the potential to expedite the drug development process and save developers significant dollars, according to Afkhami.
Creating a new drug usually takes over a decade and costs around $1 billion, according to the NIH. Biopharma companies working with BCG are seeing that AI can cut between 30%–40% of both time and money, saving roughly three to four years and $300 to $400 million, Afkhami said.
“For pharma companies, the sheer cost of bringing a drug to market makes any potential reduction in the timeline too valuable to ignore,” Phillip Neuhart, director of market and economic research at First Citizens Wealth, told SVB for its analysis.
Biopharma companies—such as Xaira Therapeutics, which raised $1 billion last year—can use AI for tasks like designing clinical trials and finding and recruiting patients for them, Afkhami said. Beyond trials, AI can help companies discover new drug products or ways to repurpose existing drugs, according to SVB. More than 100 AI-derived drug products are currently in clinical trials, the report found.
Not a magic bullet. Despite all the investor excitement, SVB warned that it’s not yet proven whether AI could lead to a higher chance of success for a drug product.
“AI might not change the probability of success yet, but it makes the process faster and cheaper,” the SVB analysts wrote. “For now, that’s more than enough to drive the attention it is getting in biopharma investment.”
This report was originally published by Healthcare Brew.
