If there is any doubt that later-stage and lower-risk private companies are attracting increasingly large slices of the venture capital pot, a look at the 10 biggest rounds of 2013 will erase it. Six of the 10 companies have already floated or signalled their intention to, taking advantage of receptive public markets.
The IPO boom meant last year saw a dip in the number of large, late-stage series G or H rounds, data from EvaluatePharma show; in previous years these were the territory of companies that were not able to go public. Seed financings also showed an uptick in 2013, raising hopes that conditions are thawing at the other end of investment spectrum (see tables below).
The table above, taken from EvaluatePharma data, shows the distribution of money spent across the venture capital-backed world over the last five years. It breaks down yesterday’s analysis, which showed that a similar amount of cash was invested last year as in 2012, but across fewer deals (Venture investments stabilise in 2013 but the winners increasingly take all, February 4, 2014).
The $122m spent on 32 seed rounds last year was above the five year average. Considering many venture capital firms have been leaning towards the less risky in an attempt to guarantee quicker and more reliable returns to their own investors, this is an encouraging sign for those concerned that many start-ups are failing to cross the so-called valley of death (Vantage Point - In valley of death funding solutions are gradually emerging, March 27, 2012).
Series A and B continued to attract the largest shares of the pot, although the rate of these financing events fell on their five-year averages, suggesting the average round got larger. This would confirm the trend of larger, tranched rounds to get a company to a “value inflection point”, as the investors term it. One case in point was last year’s second biggest round, Juno Therapeutics' huge $120m series A (Juno exploits immuno-oncology frenzy to raise huge series A, December 4, 2013).
Juno was founded by researchers from three top US cancer centres, to work on chimeric antigen receptor T cell or CAR-T programmes that have been hailed as having the potential to cure certain cancers. This is of course not a low-risk investment, but the venture funds that have backed the company clearly intend to fund this one to the finish line.
|Biggest rounds of 2013|
|Company||Financing round||Investment ($m)|
|Juno Therapeutics||Series A||120.0|
|Moderna Therapeutics||Series B||110.0|
|Revance Therapeutics*||Series E||104.0|
|Ganymed Pharmaceuticals||Series E||64.4|
|PTC Therapeutics*||Series G||60.0|
|Dicerna Pharmaceuticals*||Series C||60.0|
|NGM Biopharmaceuticals||Series C||50.0|
|*Have floated or signalled an intention to do so|
Juno stands out as the only A round to make the top 10 of 2013, although Moderna Therapeutics’ B round was almost as hefty. This company certainly represents a high risk proposition – it is working with mRNA, in an attempt to stimulate the body to produce therapeutic proteins without an immune response – but little is known about the technology and Moderna has remained tight-lipped since emerging from “stealth mode” a couple of years ago. It has also committed to remain private – having raised $175m in venture capital since 2012 and $340m in upfront fees from two research collaboration, it clearly sees little need to tap the public markets at this stage.
The majority of the other rounds in the list above were raised ahead of public flotations, as venture capital backers attempted to shore up balance sheet and signal confidence before approaching the public investors that would hopefully take the reins.
Aside from these, Ganymed stands out as the sole non-US company. The German antibody specialist has two products in clinical testing. Meanwhile NGM is working in diabetes and obesity space – a relatively rare beast given the development timelines associated with these disease areas – the company has raised over $100m since 2008 and last year struck an early-stage deal with AstraZeneca.
It seems likely that should the stream of biotech IPOs continue to flow in 2014, these trends of VC investment will continue. Optimism in the US is benefiting many across the sector at the moment. But for some, particularly in Europe, cash is still hard to come by. Should events conspire to dent that rosy outlook and stock markets take a tumble, the balance could easily swing back towards risk aversion.