Ferocious venture funding pace eases slightly in Q2

Analysis

Biotechs are well on their way to raising an unprecedented venture capital haul in 2015 as investors see a straightening route to exit in the form of acquisitions and public floats.

In a normal year Immunocore’s $320m series A announced today would be the best, but 2015 is far from normal – it is overshadowed by Moderna Therapeutics' $450m fundraising in January. Sandwiched in between is a second quarter that in relative terms represents a slight fallback from Q1, but outperforms all but five quarters since the beginning of 2007 (see tables below).

Record pace

The April-June 2015 period saw $1.55bn raised in 73 financings, bringing the total for the year to $3.8bn – a run rate that would easily outdistance 2014’s spectacular $6.8bn harvest. The quarter was marked by an impressive number of $50m-plus rounds at 11, compared with nine in 2015’s spectacular Q1 (Biotech first-quarter venture haul unprecedented since crash, April 22, 2015).

This is consistent with recent trends, in which venture financing is migrating to later and larger rounds (Where is the venture cash going? To the US and giant B rounds, April 23, 2015). Indeed, the average financing in 2015 has been $24.8m – Moderna and Nabriva, to name two, skew the average substantially above 2014’s, and Immunocore will only amplify this – and the number of $50m rounds looks well on track to exceed 2014’s 35.

But when it comes to the number of venture rounds, at the current run rate 2015 will struggle to match 2014; it might not even meet the low 358 completed in the financial crash year of 2008. This apparent drop in the number of individual rounds even as the average rises will only fuel concerns about the ability of start-ups to finance themselves through early development.

Annual VC investments
Date Investment ($bn) Financing count Avg per financing ($m) No. of rounds ≥ $50m
2015 H1 3.8 153 24.8 21
2014 6.8 438 15.6 35
2013 4.9 404 12.1 12
2012 4.7 425 11.1 16
2011 4.3 390 11.1 11
2010 4.9 439 11.2 13
2009 4.9 382 12.7 16
2008 4.8 358 13.5 13
2007 6.0 376 15.9 23

This end of the biotech finance space resembles trends in medtech, where in terms of total funding 2015 is on track to be the worst year since 2006 (Medtech venture financing crisis worsens, July 15, 2015).

Where is the money going?

Companies doing a final raising before an IPO are attracting a great deal of notice from VC backers – Austria-based Nabriva, for one, has filed to sell American depository shares on Nasdaq. Its presence in antibiotic development, and the benefit of earning qualified infectious disease product status from the FDA, makes it attractive for investors.

Top 10 rounds of Q2 2015
Company Investment ($m) Round Date
Nabriva Therapeutics 120.0 Series B Apr 2015
BeiGene 97.0 Series B May 2015
Regenxbio 70.5 Series D May 2015
CytomX Therapeutics 70.0 Series D Jun 2015
Dimension Therapeutics 65.0 Series B Apr 2015
Voyager Therapeutics 60.0 Series B Apr 2015
Clementia Pharmaceuticals 60.0 Series B Jun 2015
Unum Therapeutics 60.0 Series B Jun 2015
Edge Therapeutics 56.0 Series C Apr 2015
Jounce Therapeutics 56.0 Series B Apr 2015

Oncology, as always, is well represented in the likes of BeiGene, CytomX Therapeutics, Unum Therapeutics and Jounce Therapeutics. Rare diseases make an appearance with Regenxbio, Dimension Therapeutics, Clementia Pharmaceuticals; and advanced approaches get an entry in the gene therapy group Voyager Therapeutics.

Companies years from an IPO that are not in these attractive spaces might need to work harder to assemble a sufficiently weighty syndicate to achieve financings of the same magnitude as Nabriva and its peers. Without a reversal of this trend, the same “innovation crunch” worries that are now common in medtech will hit biopharma too. If this is the case, alternative forms of funding will need to be developed for the flow of new products to be sustained.

To contact the writer of this story email Jonathan Gardner or Edwin Elmhirst in London at news@epvantage.com or follow @ByJonGardner or @EPVantage on Twitter

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