2014 sets post-crash venture record, but you ain’t seen nothing yet

A surge of venture dollars being pumped into the biggest healthcare rounds helped make 2014 more successful in terms of VC financing than even the pre-crash 2007, but early signs are that 2015 could give it a run for its money.

A frenzy of activity in the run-up to the JP Morgan conference – marked by the record $450m round closed by Moderna Therapeutics on January 5 – saw VCs funnel some $1bn into biotech in the first week of this year alone. Against this surge the actual number of financings is holding steady, providing little solace to the sector’s less well-endowed players (see tables below).

Private biotechs attracted $6.55bn in venture capital last year, beating the $5.94bn that came in in 2007 – a time when Lehman Brothers was still standing proud and the phrase “credit crunch” had yet to enter everyday conversation. EvaluatePharma data show that $1.66bn was raised in the last three months of 2014, making this the best post-crunch fourth quarter and beating Q4 2012’s $1.63bn.

However, both statistics benefit from the inclusion of Nantworks, a business set up by Patrick Soon-Shiong that has by no means a pure healthcare focus. Nantworks’ $250m series B in December was the year’s biggest single round, and the group had closed a series A round worth $75m in January.

Beyond Nantworks the year’s biggest private round belonged to Intarcia, and the signs are that VC funds who gave it $200m in April have made a good bet. Intarcia subsequently delivered two pivotal study successes with its exenatide-secreting implant ITCA 650, and then did a deal with Servier worth $170m up front.

The money-goes-to-money rule also applied to the CAR-T player Juno Therapeutics, which followed a $134m series B round with an upsized $304m IPO last month. The year’s top 10 included four other rounds that took place in Q4: Cell Medica, Neurex and BeiGene. The analysis only counts human therapeutics companies, excluding medtech and diagnostics.

Top 10 rounds of 2014
Company Investment Financing round Date
NantWorks $250.0m Series B Oct 2014
Intarcia Therapeutics $200.0m Series H* Apr 2014
Juno Therapeutics $134.0m Series B Aug 2014
Adaptimmune $104.0m Series A Sep 2014
Paratek Pharmaceuticals $93.0m Series I* Jul 2014
Cell Medica £50.0m ($80.4m) Series B Nov 2014
Naurex $80.0m Series C Dec 2014
NantWorks $75.0m Series undisclosed Jan 2014
BeiGene ¥450.0m ($75.0m) Series A* Nov 2014
Glycotope Group €55.0m ($74.9m) Series undisclosed Mar 2014
*Series assumed

Cell Medica, a UK group backed by Imperial Innovations, tapped into enthusiasm for cell-based immunotherapies, while BeiGene, a Chinese oncology player, boasted an early-stage anti-PD-1 agent. Naurex curiously saw a bet made on its high-risk CNS focus.

Still, these biggest rounds of the biggest post-crash year for VC financing have already been crushed in the record books by Moderna’s mind-blowing $450m private raise this month (VCs fall for Moderna love with record-setting round, January 6, 2015).

It seems fairly safe to say that, when the Q1 2015 figures are totted up, the first three months of this year will have comfortably beaten the $1.55bn raised a year earlier and become the most successful post-2007 first quarter.

That said, Moderna exemplifies what is hardly a recent trend: a handful of the leading players are scooping up increasing amounts of VC cash. EvaluatePharma data show that this is accelerating: while the $6.55bn raised last year is 34% higher than in 2013, the 404 rounds completed are only slightly higher than 2013’s 392 – and down on the 420 closed in 2012.

Annual VC investments
Financing date Investment ($bn) Financing count Avg per financing ($m) No. of ≥$50m rounds
2014 6.5 404 17.5 35
2013 4.9 392 13.9 12
2012 4.7 420 12.4 16
2011 4.3 383 12.6 11
2010 4.9 425 12.7 13
2009 4.9 380 14.5 16
2008 4.7 351 15.4 13
2007 5.9 368 17.6 23

Indeed, the 20 biggest of last year’s 404 rounds accounted for 27% of the total raised – up from 13% in 2007. The pressure is on for VC firms to generate returns, and the best bet is to go for safety in numbers.

With big pharma’s own venture arms playing a growing role here the thinking is that it pays to form large, strong syndicates that can take a private business further, rather than giving a limited amount of money to a company that will then be left at the mercy of the markets the next time it needs a cash injection.

How will this feed into the surge of biotech IPOs that took place last year? While the likes of Glycotope have been rumoured to be eyeing the public markets, it would be surprising to see Moderna float any time soon.

For a start Moderna is still highly secretive about its RNA-based technology, and might shy away from an S-1 filing laying the details bare. For this and several other companies the huge amount of VC dollars raised could provide a handy security shield against the biotech crash that, sooner or later, will come.

To contact the writers of this story email Jacob Plieth or Joanne Fagg in London at news@epvantage.com or follow @JacobEPVantage or @JoEPVantage on Twitter

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