JPM Catalyst: Alnylam's Slide, Tempus's Pop, Day One's Surge

The specific event is a new report from J.P. Morgan, published ahead of its annual healthcare conference. The core finding is stark: the value of seed and Series A funding for biotech startups fell 17% last year, to $8.7 billion. This isn't just a slowdown; it's a funding winter that has intensified pressures on early-stage companies.

This squeeze is unfolding against a clear market backdrop. Over the past two years, healthcare stocks have lagged the broader market significantly. Since early 2023, the S&P 500 healthcare index has risen just 4%, while the S&P 500 itself surged 52%. This underperformance has been driven by weak earnings and diminished sentiment, creating a challenging environment for pre-revenue firms.

The thesis here is one of tactical divergence. The funding squeeze is creating a clear split. On one side are vulnerable, pre-revenue companies struggling to secure capital as venture funds and public investors alike prioritize later-stage assets with clinical data. On the other side are cash-rich, deal-focused firms-both public biotechs and large biopharma-that are positioned to capitalize. With licensing deal upfronts hitting a record $252 billion in 2025, the capital is flowing, but it's flowing to companies that have already de-risked their pipelines. The setup favors those with the balance sheet strength and strategic focus to make or take deals in this tightened market.

The Immediate Price Reaction: Winners and Losers

The market's verdict on this funding winter is clear in the moves of three distinct healthcare names. The catalyst is a repricing of risk, where pre-revenue vulnerability is punished while cash-rich, deal-focused firms are rewarded.

Alnylam's slide is a direct repricing of that pre-revenue risk. The J.P. Morgan report shows the funding squeeze hits seed and Series A rounds hardest, with value falling 17% to $8.7 billion last year. For a company like Alnylam, which operates in the early-to-mid stage of drug development, this environment means higher hurdles and longer timelines to secure capital. The market is reacting to the heightened uncertainty and longer decision timelines that slowed venture activity, making its pipeline more expensive to fund and its near-term milestones more uncertain.

Tempus AI's pop, by contrast, is justified by its record cash position. The company reported a surge in its Total Contract Value to a record $1.1 billion, driven by deals with major pharma players. This transforms Tempus from a pre-revenue startup into a cash-rich, deal-focused entity. In a market where public investors have grown more discerning and IPOs dried up, a company with a proven revenue stream and massive contracted value is insulated from the seed-stage freeze. Its growth, with revenue surging 84% in Q3, makes it a prime target for the licensing deals that are now the primary value driver.

Day One's surge reflects market optimism around its potential for a major exit. In a funding-constrained environment where venture deployment softened, the only real lifeline for many early-stage companies is a strategic acquisition or a large licensing deal. Day One, likely a pre-revenue or early-stage firm, is being priced for that possibility. The market is betting that its technology or pipeline is valuable enough to attract a $100 million+ upfront from a large biopharma company, which is now the favored path for capital deployment. This is the tactical divergence in action: the slide for those without a near-term cash runway, the pop for those with one, and the surge for those seen as potential acquisition targets.

The Mechanics: Why These Moves Make Sense

The market's reaction to the J.P. Morgan report is a direct translation of the funding dynamics into investment logic. The core divide is now stark: well-funded, late-stage companies with clinical data or enterprise deals are being rewarded, while cash-strapped startups are being punished.

The mechanics are clear. Venture capital and public investors alike have shifted priorities, concentrating capital in later-stage rounds that have been partly de-risked by clinical data. This has widened the gap between early- and late-stage activity. As a result, the primary path to value creation has shifted from venture rounds to licensing deal upfronts. In 2025, biopharma companies committed a record $252 billion to licensing deals, with upfront cash steady at 7%. This creates a clear exit path for companies that can demonstrate value, making them attractive targets for acquisition or partnership.

This is why Tempus AI's record contract value is so powerful. Its Total Contract Value surged to a record $1.1 billion, driven by deals with major pharma players like Pfizer and Eli Lilly. This isn't just revenue growth; it's a massive, contracted cash flow that insulates the company from the seed-stage freeze. In a market where IPOs dried up and venture deployment softened, a company with this kind of enterprise deal pipeline is fundamentally better positioned to weather the storm.

The bottom line is a bifurcated market. For pre-revenue firms, the funding winter means higher hurdles and longer timelines, directly pressuring their valuations. For those with strong enterprise deals, the mechanics are the opposite. They are the preferred targets for the robust M&A and licensing activity that has continued. Biopharma M&A, for instance, remained active in Q4 2025, with total annual value exceeding $138 billion. In this setup, the market is pricing in the stark reality of capital concentration. The winners are those with the cash runway and strategic deals to capitalize on the available capital, while the losers are those left scrambling for the dwindling early-stage pool.

The Setup: What to Watch Next

The market's current split is a direct bet on capital concentration. The near-term catalysts will be signs of a thaw in early-stage funding or a shift in venture priorities, which could trigger a sharp rotation into smaller, pre-revenue biotechs. For now, the flow of M&A and licensing deals is the primary validation mechanism, determining which companies get acquired or funded.

Watch for any data showing a reversal in the 17% drop in seed and Series A funding or a softening of the heightened diligence standards that slowed early-stage activity. If venture deployment picks up again, especially in Series B+, it would signal a broader easing of pressure. That could spark a rotation into the vulnerable, pre-revenue names that have been punished. The key metric to monitor is the number and value of early-stage rounds, which fell to $8.7 billion last year.

At the same time, the flow of M&A and licensing deals will continue to validate the current market split. The record $252 billion committed to licensing in 2025 is the new value driver, and the market is pricing in that reality. Watch for deal announcements, particularly those with large upfronts for later-stage assets, as they will reinforce the preference for de-risked pipelines. The recent activity in biopharma M&A, which exceeded $138 billion in annual value, provides a backdrop for potential acquisitions of promising pre-revenue firms.

A critical watchpoint is divergence between stock price and contract value metrics. Tempus AI's case is instructive: its Total Contract Value surged to a record $1.1 billion while its stock remains in a bear market. This disconnect highlights a potential mispricing. If a company's contracted cash flow is growing rapidly but its stock price lags, it may signal an undervaluation. Conversely, a surge in stock price that outpaces contract value growth could signal over-optimism. Monitoring these metrics will help spot the next winners and losers in this bifurcated market.